Tag: legislation

Utah Becomes Fourth U.S. State to Enact Consumer Privacy Law

On March 24, 2022, Utah became the fourth state in the U.S., following California, Virginia and Colorado, to enact a consumer data privacy law, the Utah Consumer Privacy Act (the “UCPA”). The UCPA resembles Virginia’s Consumer Data Protection Act (“VCDPA”) and Colorado’s Consumer Privacy Act (“CPA”), and, to a lesser extent, the California Consumer Privacy Act (as amended by the California Privacy Rights Act) (“CCPA/CPRA”). The UCPA will take effect on December 31, 2023.

The UCPA applies to a controller or processor that (1) conducts business in Utah or produces a product or service targeted to Utah residents; (2) has annual revenue of $25,000,000 or more; and (3) satisfies at least one of the following thresholds: (a) during a calendar year, controls or processes the personal data of 100,000 or more Utah residents, or (b) derives over 50% of its gross revenue from the sale of personal data, and controls or processes the personal data of 25,000 or more consumers.

As with the CPA and VCDPA, the UCPA’s protections apply only to Utah residents acting solely within their individual or household context, with an express exemption for individuals acting in an employment or commercial (B2B) context. Similar to the CPA and VCDPA, the UCPA contains exemptions for covered entities, business associates and protected health information subject to the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), and financial institutions or personal data subject to the Gramm-Leach-Bliley Act (“GLB”). As with the CCPA/CPRA and VCDPA, the UCPA also exempts from its application non-profit entities.

In line with the CCPA/CPRA, CPA and VCDPA, the UCPA provides Utah consumers with certain rights, including the right to access their personal data, delete their personal data, obtain a copy of their personal data in a portable manner, opt out of the “sale” of their personal data, and opt out of “targeted advertising” (as each term is defined under the law). Notably, the UCPA adopts the VCDPA’s more narrow definition of “sale,” which is limited to the exchange of personal data for monetary consideration by a controller to a third party. Unlike the CCPA/CPRA, CPA and VCDPA, the UCPA will not provide Utah consumers with the ability to correct inaccuracies in their personal data. Also unlike the CPA and VCDPA, the UCPA will not require controllers to obtain prior opt-in consent to process “sensitive data” (i.e., racial or ethnic origin, religious beliefs, sexual orientation, citizenship or immigration status, medical or health information, genetic or biometric data, or geolocation data). It will, however, require controllers to first provide consumers with clear notice and an opportunity to opt out of the processing of his or her sensitive data. With respect to the processing of personal data “concerning a known child” (under age 13), controllers must process such data in accordance with the Children’s Online Privacy Protection Act. The UCPA will prohibit controllers from discriminating against consumers for exercising their rights.

In addition, the UCPA will require controllers to implement reasonable and appropriate data security measures, provide certain content in their privacy notices, and include specific language in contracts with processors.

Unlike the CCPA/CPRA, VCDPA and CPA, the UCPA will not require controllers to conduct data protection assessments prior to engaging in data processing activities that present a heightened risk of harm to consumers, or to conduct cybersecurity audits or risk assessments.

In line with existing U.S. state privacy laws, the UCPA does not provide for a private right of action. The law will be enforced by the Utah Attorney General.

Article By the Privacy and Cybersecurity Practice Group at Hunton Andrews Kurth

For more cybersecurity and data privacy legal news, click here to visit the National Law Review.

Copyright © 2022, Hunton Andrews Kurth LLP. All Rights Reserved.

Pennsylvania Lawmakers Propose New State Office to Support Immigrants

A group of Pennsylvania lawmakers recently proposed legislation to establish the Office of New Pennsylvanians, which aims to attract, retain, and embrace immigrants in Pennsylvania. As Pennsylvania continues to suffer lagging population growth, the proposal highlights the critical need to welcome immigrants and support their transition to the Commonwealth.

Population Growth Lagging in Pennsylvania

Despite being the fifth-largest state in the country, Pennsylvania has experienced slower population growth than much of the country. According to 2020 census data, Pennsylvania has achieved only 2.4% population growth since 2010, ranking 44th out of 50 states. Western states like Utah (18.4%), Idaho (17.3%), and Texas (15.9%) led all states in population growth during the same period.

Due to this lagging growth, Pennsylvania is set to lose a congressional seat in this year’s redistricting, for a decrease from 18 to 17 seats in the U.S. House of Representatives. The loss of a congressional seat could cost the Commonwealth political clout and will affect the amount of federal funding it receives, which is often based on population.

Despite Pennsylvania’s lagging population growth, its immigrants are becoming an increasingly important portion of its economy. According to the American Immigration Council, one in fourteen residents of Pennsylvania is an immigrant, while one in ten entrepreneurs is an immigrant. In fact, immigrants represent approximately 9% of the entire workforce in Pennsylvania. For this reason, lawmakers are exploring options to promote and retain immigrants and spur additional growth in Pennsylvania.

Proposed Legislation Creating the Office of New Pennsylvanians

On Feb. 9, 2022, members of the Welcoming PA Caucus of the Pennsylvania House of Representatives formally unveiled House Bill 2173, which proposes the creation of the Office of New Pennsylvanians. The bill, sponsored by Reps. Sara Innamorato (D-Allegheny) and Joe Hohenstein (D-Phila.), will be responsible for attracting, retaining, and embracing immigrants who live in Pennsylvania. Speaking of the bill, Rep. Innamorato noted, “immigrants move to our country for the promise of freedom and more opportunity. But recent census data shows Pennsylvania is lagging in population growth. So, it’s more important than ever to enact policies that welcome them to our beautiful Commonwealth.”

The proposed Office of New Pennsylvanians will operate within the Department of Community and Economic Development (“DCED”). Additionally, the proposed legislation will develop an advisory committee consisting of appointed public and private officials who will make recommendations to the governor on policies, procedures, regulations, and legislation to attract, retain, and integrate immigrants.

If created, the Office of New Pennsylvanians will respond to immigration-related issues and inquiries, coordinate with state agencies regarding immigration-related policy, and work with stakeholders (including higher education facilities, municipal officials, and business leaders) to develop strategies to attract and retain immigrants in the Commonwealth.

Rep. Hohenstein stressed that “it is incumbent upon each of us to ensure that people who emigrate from their home country to Pennsylvania will find a new welcoming, supportive home here. Codifying the support we provide to immigrants would establish that we see our responsibility to our immigrant neighbors as a priority and would benefit all Pennsylvanians.”

The bill was introduced on Dec. 16, 2021, and has been referred to the Committee on State Government. Sponsored and co-sponsored by Democrats, it must overcome a Republican majority in Harrisburg before being enacted into law.

©2022 Norris McLaughlin P.A., All Rights Reserved
For more articles about Pennsylvania, visit the NLR Pennsylvania area of law page.

New York To Require Licensure of Pharmacy Benefit Managers

In an effort to counteract rising prescription drug costs and health insurance premiums, New York Governor Hochul signed S3762/A1396 (the Act) on December 31, 2021.  This legislation specifies the registration, licensure, and reporting requirements of pharmacy benefit managers (PBMs) operating in New York. The Superintendent of the Department of Financial Services (Superintendent) will oversee the implementation of this legislation and the ongoing registration and licensure of PBMs in New York. Notably, this legislation establishes a duty of accountability and transparency that PBMs owe in the performance of pharmacy benefit management services.

Though the Governor only recently signed the Act, on January 13, 2022, an additional piece of legislation, S7837/A8388, was introduced in the New York Legislature.  If passed, this legislation would amend and repeal certain provisions proposed in the Act.  As of the date of this blog post, both the Senate and Assembly have passed S7837/A8388, and it has been delivered to the Governor for signature. Anticipating that Governor Hochul will sign S7837/A8388 into law, we have provided an overview of the Act, taking into account the impact that S7837/A8388 will have, and the changes that both make to the New York State Insurance, Public Health, and Finance Laws.

New York State Insurance Law: Article 29 – Pharmacy Benefit Managers

The Act adds Article 29 to the Insurance Law.  The Section includes, among other provisions, definitions applicable to PBMs, as well as licensure, registration, and reporting requirements, as detailed below.

Definitions

Section 2901 incorporates the definitions of “pharmacy benefit manager” and “pharmacy benefit management services” of Section 280-a of the Public Health Law.  “Pharmacy benefit management services” is defined as “the management or administration of prescription drug benefits for a health plan.”  This definition applies regardless of whether the PBM conducts the administration or management directly or indirectly and regardless of whether the PBM and health plan are associated or related. “Pharmacy benefit management services” also includes the procurement of prescription drugs to be dispensed to patients, or the administration or management of prescription drug benefits, including but not limited to:

  • Mail service pharmacy;
  • Claims processing, retail network management, or payment of claims to pharmacies for dispensing prescription drugs;
  • Clinical or other formulary or preferred drug  list  development or management;
  • Negotiation  or  administration  of  rebates, discounts, payment differentials, or other incentives,  for  the  inclusion  of  particular prescription  drugs  in a particular category or to promote the purchase of particular prescription drugs;
  • Patient compliance, therapeutic intervention, or  generic  substitution programs;
  • Disease management;
  • Drug utilization review or prior authorization;
  • Adjudication  of appeals or grievances related to prescription drug coverage;
  • Contracting with network pharmacies; and
  • Controlling the cost of covered prescription drugs.

A “pharmacy benefit manager” is defined as any entity that performs the above listed management services for a health plan.  Finally, the term “health plan” is amended to encompass entities that a PBM either provides management services for and is a health benefit plan or reimburses, in whole or in part, at least prescription drugs, for a “substantial number of beneficiaries” that work in New York.  The Superintendent has the discretion to interpret the phrase “substantial number of beneficiaries.”

Registration Requirements

PBMs currently providing pharmacy benefit management services must register and submit an annual registration fee of $4,000 to the Department of Financial Services (DFS) on or before June 1, 2022 if the PBM intends to continue providing management services after that date. After June 1, 2022, every PBM seeking to engage in management services must register and submit the annual registration fee to DFS prior to engaging in management services. Regardless of when a PBM registers, every PBM registration will expire on December 31, 2023.

Reporting Requirements

On or before July 1 of each year, each PBM must report and affirm the following to the Superintendent, which includes, but is not limited to:

  • Any pricing discounts, rebates of any kind, inflationary payments, credits, clawbacks, fees, grants, chargebacks, reimbursement, other financial or other reimbursements, inducements, refunds or other benefits received by the PBM; and
  • The terms and conditions of any contract or arrangement, including other financial or other reimbursement incentives, inducements, or refunds between the PBM and any other party relating to management services provided to a health plan including, but not limited to, dispending fees paid to pharmacies.

The Superintendent may request additional information from PBMs and their respective officers and directors. Notably, the above documentation and information are confidential and not subject to public disclosure, unless a court order compels it or if the Superintendent determines disclosure is in the public’s best interest.

Licensing Requirements

The Superintendent is also responsible for establishing standards related to PBM licensure.  The Superintendent must consult with the Commissioner of Health while developing the standards.  The standards must address prerequisites for the issuance of a PBM license and detail how a PBM license must be maintained.  The standards will cover, at a minimum, the following topics:

  • Conflicts of interest between PBMs and health plans or insurers;
  • Deceptive practices in connection with the performance of management services;
  • Anti-competitive practices connected to the performance of management services;
  • Unfair claims practices in connection with the performance of pharmacy benefit managements services;
  • Pricing models that PBMs use both for their services and for payment of services;
  • Consumer protection; and
  • Standards and practices used while creating pharmacy networks and while contracting with network pharmacies and other providers and in contracting with network pharmacies and other providers.  This will also cover the promotion of patient access, the use of independent and community pharmacies, and the minimization of excessive concentration and vertical integration of markets.

To obtain a license, PBMs must file an application and pay a licensing fee of $8,000 to the Superintendent for each year that the license will be valid.  The license will expire 36 months after its issuance, and a PBM can renew their license for another 36-month period by refiling an application with the Superintendent.

New York State Public Health Law: Amendments to Section 280-a

Duty, Accountability, and Transparency of PBMs

As briefly mentioned above, the Act also amends Public Health Law 280-a.  Notably, this legislation imposes imposes new duty, accountability, and transparency requirements on PBMs.  Under the new law, PBMs interacting with a covered individual have the same duty to a covered individual as the PBM has to the health plan for which the PBM is performing management services. PBMs are also compelled to act with a duty of good faith and fair dealing towards all parties, including, but not limited to, covered individuals and pharmacies. In addition, PBMs are required to hold all funds received from providing management services in trust.  The PBMs can only utilize the funds in accordance with its contract with their respective health plan.

To promote transparency, PBMs shall account to their health plan any pricing discounts, rebates, clawbacks, fees, or other benefits it has received. The health plan must have access to all of the PBMs’ financial information related to the management services the PBM provides it.  The PBMs are also required to disclose in writing any conflicts of interest PBMs shall disclose in writing any conflicts of interests, as well as disclose the terms and conditions of any contract related to the PBM’s provision of management services to the health plan, including, but not limited to, the dispensing fees paid to pharmacies.

New York State Finance Law: Addition of Section § 99-oo

If enacted, S7837/A8388 will add Section 99-oo to the Finance Law.  This law would create a special fund called the Pharmacy Benefit Manager Regulatory Fund (Fund).  The New York State Comptroller (Comptroller) and Commissioner of Tax and Finance will establish the Fund and hold joint custody over it. The Fund will primarily consist of money collected through fees and penalties imposed under the Insurance Law.  The Comptroller must keep Fund monies separate from other funds, and the money shall remain in the Fund unless a statute or appropriation directs its release.

Looking Forward: PBM Regulation in New York and Beyond

In a January 2, 2022, press release, Governor Hochul touted the Act as “the most comprehensive [PBM] regulatory framework” in the United States.  The Governor has made clear her intent to regulate PBMs, and New York lawmakers appear to just be getting started.  PBMs in New York and throughout the United States should anticipate their state’s legislatures introducing and enacting more laws and regulations.

©1994-2022 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.
For more about pharmacies, visit the NLR Healthcare section.

A View From Washington, DC — Budgets, Bills, and Elections

February in Washington, DC, usually ushers in the start of a new federal budget approval process, but that will not be the case this year. President Joe Biden is not expected to release his fiscal year 2023 budget until later this spring, which will be followed by congressional hearings and oversight on our nation’s federal spending. While the president’s budget is not binding, in a Congress controlled by his own party, his suggestions on how Congress should appropriate our federal dollars are certainly taken seriously.

Furthering delays, Congress is still mired in passing the fiscal year 2022 appropriations bills — which appear to now be on target for passage in mid-March. Part of the slowdown on passing these bills revolves around an agreement on the overall topline spending number. The House approved $1.506 trillion in spending in its versions of the 12 annual appropriations bills. The Senate never released a topline number. President Biden’s budget request was for $1.523 trillion, $770 billion for nondefense spending and $753 billion for defense spending. Also of note, assuming these bills are enacted, it will be the first time in a decade that Congress has provided funds for earmarks (now referred to as “community projects”) through appropriations legislation.

Another weighty item on Congress’ agenda is the reauthorization of the nation’s flood insurance program. The National Flood Insurance Program (NFIP) was last reauthorized in 2012, when Congress passed the Biggert-Waters Flood Insurance Reform Act of 2012. The NFIP’s five-year reauthorization ended on September 30, 2017, and since then, the program has been funded by a series of short-term measures. The program is currently operating under an extension that expired on February 18, 2022. The purpose of the Biggert-Waters Act was to make the NFIP solvent, as the program faced a $24 billion deficit. But anyone who has kept apprised of the program knows it’s not solvent and is broken in many respects. Current policyholders are facing an 18% policy rate increase in the coming year.

Finally, once summer arrives, many in Congress will turn their attention in earnest to the mid-term elections in November. Several states have new congressional maps due to redistricting. The released census data gave Texas, Florida, North Carolina, Montana, and Oregon additional seats, while California, New York, and Pennsylvania (among others) lost seats. In an almost evenly divided House, the Republicans only need to pick up three to five seats in order to take control, and most observers expect that to happen. The current US Senate is evenly divided and most incumbent Senate seats are safe, but a few states, such as Georgia, Nevada, Wisconsin, and Pennsylvania, are statistically tied in current polling and are truly toss-up elections at this point, leaving control of the US Senate up for grabs.

© 2022 Jones Walker LLP
For more articles about election and legislative updates, visit the NLR Election & Legislative section.

California Considers Unclaimed Property Voluntary Disclosure, Interest Forgiveness Legislation

The California State Assembly is considering Assembly Bill 2280, which would launch a much-anticipated opportunity for businesses to report unclaimed property to California – interest-free – under an amnesty program.

Unclaimed property is a regulatory challenge for businesses in every industry and commonly results when company financial obligations remain unsatisfied or inactive for a legally defined period.

The unclaimed property is often owed to vendors, employees, customers, or shareholders stemming from ordinary business transactions, including:

  • accounts receivable credits
  • bank and investment accounts
  • gift cards
  • royalties
  • securities and dividends
  • uncashed payroll and vendor payments
  • virtual currencies

California has tried passing voluntary compliance legislation since its amnesty program expired several years ago, but has been unsuccessful. The sleeping giant has again awakened.

Any company with operations in California, with California-formed entities, or with customers, vendors, or employees in California should proactively evaluate its unclaimed property compliance and monitor this legislation carefully.

Every state’s law requires companies to report unclaimed property to the state annually, yet compliance rates are low nationwide. AB 2280 estimates that 1.3 million California tax-filing businesses did not correctly report unclaimed property in 2020. To close this compliance gap, California and most other states regularly audit companies to identify unreported unclaimed property. Such audits often involve detailed reviews of company accounting records for 10 or more years by third-party auditors on behalf of numerous states.

Currently, California imposes 12 percent annual interest on any past-due unclaimed property identified, which likely deters annual compliance, with companies electing to wait for the state to authorize an audit rather than pay the interest assessment. The new bill aims to fix that.

Under AB 2280, California’s Controller is authorized to establish a voluntary disclosure agreement (VDA) or voluntary compliance program for any company that:

  • is not currently under examination by California
  • is not involved in a civil or criminal action involving unclaimed property compliance
  • has not been notified of an unclaimed property interest assessment or negotiated a waiver of interest in the last five years

The proposed law would allow the state to forgive the interest if the company:

  • participates in an educational training program
  • reviews accounting records for unclaimed property for 10 years
  • makes sufficient efforts to reunite property with owners
  • timely files initial reports and remits all identified unclaimed property for the 10 years

The bill may be heard in committee March 19 and it is unclear whether this legislation will become a reality. AB 2280 is not California’s first voluntary disclosure effort. California had a temporary unclaimed property amnesty program in the early 2000s, and the State Assembly declined to advance voluntary disclosure program legislation in February 2018.

Notably, even if AB 2280 successfully becomes law, the voluntary compliance program is contingent upon the legislature appropriating funds in the Budget Act.

Beyond AB 2280, California is ramping up other efforts to drive unclaimed property compliance:

  • In the 2019 California Budget Act, the State Controller’s Office was tasked with increasing unclaimed property compliance, including through adopting an unclaimed property amnesty program; it’s unclear whether this particular bill satisfies that task or if there is more to come
  • In July 2021, California’s governor approved and signed into law Assembly Bill 466, which authorizes the Franchise Tax Board to share information with the Controller’s

Office regarding the taxpayer’s revenue and previous unclaimed property compliance (or lack thereof). This development is notable because revenue and reporting history detail is often used by states to identify companies for unclaimed property enforcement initiatives.

Voluntary compliance programs and VDAs that include an interest abatement are a common-sense incentive for voluntary compliance for states, and the advantages for companies merit thoughtful consideration.

© 2022 BARNES & THORNBURG LLP
For more articles about California legislation, visit the NLR California law section.

Federal Cannabis Reform – Is 2022 the Year?

Hope soared with the possibility of federal cannabis reform in 2021.  And for good reason –  the induction of a new, more liberal administration, rapid state-level legalization, broad support by Americans,[1] and growing bipartisan backing led many to believe that 2021 was going to be the year where federal decriminalization of cannabis would become a reality.  But, as 2021 continued on, optimism dwindled as any advancement in federal cannabis reform was hobbled by the inability of Congress to agree on the appropriate level of reform  and the proper mechanics for passage.  Specifically, tension rose amongst the elected Democrats on whether to support incremental reform (like access to banks or removal of cannabis from the list of Schedule 1 drugs) or comprehensive legalization with provisions to address social inequities stemming from the legacy of the War on Drugs.  And so 2021 came to an end, and the cannabis industry saw yet another year of failed meaningful change on the federal level.

Still, momentum for reform has not been lost.  If anything, last year saw more bills introduced into Congress (including two new federal legalization proposals) than ever before – clearly indicating its import to our nation’s leaders.  Justice Clarence Thomas from the Supreme Court even subtly advised Congress to address legalization, noting that the Federal Government’s current “half in, half out regime” on cannabis strained the principles of federalism.

And so, as we move forward in 2022 with hope, we review the bills before Congress and their progresses to assess which of these may have some traction for passage during this upcoming year.

Secure and Fair Enforcement (“SAFE”) Banking Act of 2021[2]

Considered modest reform, the SAFE Banking Act of 2021 mainly focused on granting cannabis-related businesses access to federally-backed financial institutions.  The bill was introduced early in 2021,[3] and passed in the U.S. House of Representatives on April 20, 2021 by a vote of 321 to 101.  At the time of the House’s passage, many believed the SAFE Banking Act of 2021 would easily move its way through the Senate, due – in part – to its demonstrated bipartisan appeal with 106 Republican votes in the House.  Congressman Ed Pearlman, one of its drafters, even remarked:

After years of bringing up this issue, I’m thrilled to see overwhelming support for this bipartisan, commonsense legislation in the U.S. House once again. I feel optimistic about the path forward for the SAFE Banking Act and, more broadly, reforms to our federal cannabis laws.[4]

However, after its passage in the House, the SAFE Banking Act of 2021 languished in the Senate’s Committee on Banking, Housing and Urban Affairs.  Momentum for the bill slowed, with those opposing it campaigning for more comprehensive legalization.  In late September 2021, fervor for the SAFE Banking Act of 2021 arose again when the House passed, by voice vote, an amendment to the National Defense Authorization Act for Fiscal Year 2022 (“NDAA”) to add the SAFE Banking Act of 2021.  Many hoped that by couching the SAFE Banking Act of 2021 in the NDAA, it would make it easier to pass through the Senate.  On November 23, 2021, 4 Senators[5] penned a letter to the Senate’s Armed Services Committee urging them to retain the SAFE Banking Act of 2021 in the NDAA.  Despite these efforts, the SAFE Banking Act of 2021 was stripped from the NDAA on December 10, 2021 – stalling its progress once more.

The Marijuana Opportunity Reinvestment & Expungement (“MORE”) Act

The MORE Act is the oldest comprehensive legislative proposal.  It was passed in the House in December 2020, during a lame-duck session, but never made any headway in the Senate.[6]  On May 28, 2021, Representative Jerrold Nadler reintroduced the MORE Act into the House and much of its substance provided the legislative stepping stones for the Cannabis Administrative and Opportunity Act (“CAO”).

The MORE Act aimed to end criminalization of cannabis by removing it from the list of controlled  substances, eliminate related past criminal penalties and convictions, and provide essential criminal justice reform, social justice and economic development for those affected by the War on Drugs.  The MORE Act also would tax cannabis products starting at 5% to 8% (increasing by 1% over 5 years) to help fund social reform projects, make Small Business Administration loans and services available to cannabis-related businesses, and prohibit denial of federal public benefits (like housing) and protections under immigration law on the basis of cannabis-related conduct or conviction.

After sitting in the House Judiciary Committee, the bill was finally approved in the Committee on September 30, 2021, with 2 Republican Representatives voting yes.  This act sent the measure to the House floor for another vote before it could make its way to the Senate.

The Cannabis Administrative and Opportunity Act

Embracing the MORE Act’s goals for comprehensive reform, Senate Majority Leader Chuck Schumer (along with Senators Cory Booker  and Ron Wyden) introduced the long awaited draft of the CAO into the Senate on July 14, 2021.  Considered a historic and ambitious bill, the CAO aimed to implement a full-scale federal scheme for cannabis reform that reaches beyond just decriminalization.  It hopes to provide restorative measures “to lift up people and communities who were unfairly targeted in the War on Drugs.”[7] Specifically, the CAO seeks to do the following:

  • Decriminalize cannabis by removing it from the Controlled Substances Act and automatically expunge any arrests and convictions for non-violent federal cannabis offenses;
  • Transfer primary agency jurisdiction over cannabis to the Food and Drug Administration (“FDA”), the Alcohol and Tobacco Tax and Trade Bureau (“TTB”), and the Bureau of Alcohol, Tobacco and Firearms (“ATF”) so that cannabis can be federally regulated similar to alcohol and tobacco;
  • Establish a Center for Cannabis Products responsible for regulating the “cannabis aspect of all products containing cannabis,” and implementing requirements related to cannabis products (g., good manufacturing practice, product standards, product labeling, product distribution and recall, etc.) within the FDA;
  • Mandate federal research and studies regarding the impact of cannabis (including any benefits and/or impairments) on the human brain and health conditions and its impact on drivers under its influence;
  • Permit movement of cannabis products through channels of interstate commerce;
  • Establish Opportunity Trust Fund Programs funded by federal cannabis tax revenue to restore and reinvest in communities greatly impacted by the War on Drugs (including funds for job training, reentry services, legal aid, and youth recreation/mentoring programs) and to help level the playing field by granting entrepreneurs of color access to the cannabis industry through small business loans;
  • Prohibit denial of federal benefits or immigration protection due to a past cannabis-related offense; and
  • Impose federal excise tax on sale of cannabis products, starting at 10% and increasing up to 25% in a span of 5 years, with certain favorable tax credit for cannabis producers with less than $20 million sales.

Though the CAO has lofty goals, it does not force states to legalize cannabis, emphasizing the integrity of state-specific cannabis law.

As a draft bill, the CAO was subject to a review period in which its authors requested public comments by September 1, 2021.  At the expiration of this review period, the drafters of the bill received numerous comments from both supporters and those criticizing the CAO as overly ambitious and a big-government approach.  In particular, many critics take issue with the bill’s tax structure, calling the imposition of an ultimate 25% federal excise tax burdensome.  Indeed, the CAO – as it stands – implements the highest tax structure for cannabis products of all the bills proposed in 2021.  Many allege that the high federal tax in addition to any state-imposed tax could promote the illicit cannabis market rather than encourage business owners to engage legally.  Additionally, the high federal tax could force states to reduce their own tax requirements, negatively affecting their own ability to fund state-run social equity and education initiatives.

For now, the public comments have been taken under advisement as the cannabis industry waits to see what the drafters decide to incorporate.  Once formally filed, the CAO will be sent to a committee for continued discussions and revisions before it can be advanced to the Senate floor for a vote.

The States Reform Act

The States Reform Act (“SRA”) is the latest comprehensive reform bill led by Republican Representative Nancy Mace and introduced in the House in November 15, 2021.  Like the MORE Act and the CAO, the SRA also seeks to decriminalize cannabis and provides retroactive expungement for non-violent federal cannabis offense, except for any person involved in a drug cartel.  However, the SRA differentiates itself by limiting federal social equity reform programs.  Instead, the SRA vests the authority  to determine what level of cannabis reform, including outright prohibition, in the individual states.  States will also retain authority to regulate the use, distribution, sale and manufacturing of cannabis, with some general federal oversight by the FDA, TTB, ATF and the Department of Agriculture.  Specifically, the SRA aims to regulate cannabis like alcohol (and alcohol alone) – another substantial difference from the CAO.  The SRA permits each state to determine the appropriate age limit for purchase of cannabis products, but incentivizes states to implement a 21+ limit by eliminating funding for highways for any state with an age limit of under 21 years of age and prohibiting advertisements directed at any person under the age of 21.  The bill also seeks to provide veterans with access to medical cannabis without fear of discrimination or denial of Veteran Affairs benefits.  The SRA also generally requires that medical cannabis be permitted for treatment of arthritis, cancer and chronic pain.  Similar to the CAO, the SRA will also allow the interstate cannabis transportation.

Notably, the SRA provides the lowest tax structure for cannabis products in comparison to other reform proposals, with the proposed imposition of a single tax rate of 3% that cannot be increased for at least 10 years.  Revenues from the tax would be used to support SBA programs for cannabis businesses, law enforcement initiatives including reentry programs, and veteran mental health programs.

Given its recency, little is known about the bill’s reception in the House and any progress that has been made.  However, the SRA does carry potential bipartisan appeal, particularly because it is sponsored by 4 Republican Representatives.  Additionally, it is anticipated that the Congressional Republicans will appreciate the SRA’s straight forward tax structure capped at a low rate for at least 10 years and its stance on states’ sovereignty regarding cannabis reform.  The real issue for the SRA is its lack of restorative justice and social equity efforts, which may be its death knell in the current Democrat-controlled House.

Implications for 2022

There are now 4 bills (3 with comprehensive legislation) circulating Capitol Hill that could provide much needed cannabis reform in 2022.  Congress will likely continue debating, revising and attempting to compromise on the terms in the MORE Act, the CAO and the SRA.  Potentially, if the 3 comprehensive bills remain on the discussion table, they will compete with one another, potentially dividing the Legislators’ support.  Congress should thus focus on forging a compromise or middle ground on these reforms to increase bipartisan support and avoid competing and inconsistent bills floating around, resulting in another year of unwanted (and unnecessary) deadlock.  Indeed, the CAO could be an example of such needed compromise – especially if the drafters seriously heed the criticisms and comments provided during the bill’s review period and consider incorporating certain bipartisan elements of the SRA, like a more stream-lined and lower rate tax structure.  With that said, the status of these cannabis reform bills, particularly the CAO and the MORE Act, face potential change should this year’s mid-term elections change the makeup of who controls the Senate, House or both.

Regardless, until Congress can iron out the kinks on comprehensive cannabis reform, the SAFE Banking Act of 2021 remains a practical law to pass in the interim.  The SAFE Banking Act of 2021 is currently the least controversial of all the cannabis-reform bills, has substantial bipartisan appeal, and will provide immediate financial resources and relief to the largely cash-based cannabis industry.  Though a small reform, it is still a necessary one that is long overdue.  The SAFE Banking Act of 2021 (and its predecessors) has already made its way through the House 6 times, proving that federal lawmakers believe it will help cannabis businessmen.  It may not resolve the issue of prohibition on cannabis, but its passage will likely be a great victory for the cannabis industry, signal federal de-stigmatization of cannabis, promote public safety by discouraging participation in the illicit cannabis market, and help cannabis-related businesses comply with tax laws.

Footnotes

[1] https://news.gallup.com/poll/356939/support-legal-marijuana-holds-record…

[2] On February 4, 2022, the SAFE Banking Act passed again in the House – this time, as an included amendment to the America COMPLETES Act.

[3] The bill is the successor to the previously introduced SAFE Banking Act of 2019.  See https://www.cannabislawblog.com/2021/09/safe-banking-act-2021/

[4] https://perlmutter.house.gov/news/documentsingle.aspx?DocumentID=5486

[5] Gary Peters, Angus King, Kevin Cramer, and Mark Kelly

[6] https://www.cannabislawblog.com/2020/12/house-representatives-passes-bil…

[7] https://www.democrats.senate.gov/imo/media/doc/CAOA%20Detailed%20Summary

 

Article By Jennifer N. Le of Sheppard, Mullin, Richter & Hampton LLP

For more cannabis legal news, click here to visit the National Law Review.

Copyright © 2022, Sheppard Mullin Richter & Hampton LLP.

Mississippi Enacts Medical Marijuana Law

Mississippi Governor Tate Reeves signed legislation legalizing medical cannabis on February 2, 2022. Known as the “Mississippi Medical Cannabis Act”, the law permits the use of medical cannabis to treat certain debilitating medical conditions including cancer, Parkinson’s disease, Huntington’s disease, muscular dystrophy, HIV/AIDS, hepatitis, ALS, Crohn’s disease, ulcerative colitis, sickle-cell anemia, Alzheimer’s disease, dementia, post-traumatic stress disorder, autism,  cachexia or wasting syndrome, chronic pain, severe or intractable nausea, seizures, severe and persistent muscle spasms, among others.  The law was effective immediately upon signing by the Governor, although medical cannabis will not become available for months.

Medical cannabis products will include cannabis flower, cannabis extracts, edible cannabis products, beverages, topical products, ointments, oils, tinctures and suppositories.

The medical cannabis law contains many favorable provisions for employers.  Specifically:

  1. Employers are not required to permit or accommodate the medical use of medical cannabis, or to modify any job or working conditions or any employee who engages in the medical use of cannabis, or seeks to engage in the medical use of cannabis;
  2. Employers are not prohibited from refusing to hire, discharging, disciplining, or otherwise taking adverse employment action against an individual with respect to hiring, discharging, tenure, terms, conditions or privileges of employment as a result, in whole or in part, of that individual’s medical use of medical cannabis, regardless of the individual’s impairment or lack of impairment resulting from the medical use of medical cannabis;
  3. Employers are not prohibited from establishing or enforcing a drug testing policy;
  4. Employers may discipline employees who use medical cannabis in the workplace or who work while under the influence of medical cannabis.
  5. The law does not interfere with, impair or impede any federal requirements or regulations such as the U.S. Department of Transportation’s drug and alcohol testing regulations;
  6. The law does not permit, authorize or establish an individual’s right to commence or undertake any legal action against an employer for refusing to hire, discharging, disciplining or otherwise taking an adverse employment action against an individual with respect to hiring, discharging, tenure, terms, conditions or privileges or employment due to the individual’s medical use of medical cannabis;
  7. Employers and their workers’ compensation carriers are not required to pay for or to reimburse an individual for the costs associated with the medical use of cannabis;
  8. The law does not affect, alter or otherwise impact the workers’ compensation premium discount available to employers who establish a drug-free workplace program in accordance with Miss. Code Section 71-3-201 et seq.;
  9. The law does not affect, alter or otherwise impact an employer’s right to deny or establish legal defenses to the payment of workers’ compensation benefits to an employee on the basis of a positive drug test or refusal to submit to or cooperate with a drug test, as provided under Miss. Code Sections 71-3-7 and 71-3-121;
  10. The law does not authorize an individual to act with negligence, gross negligence, recklessness, in breach of any applicable professional or occupational standard of care, or to effect an intentional wrong, as a result, in whole or in part, of that individual’s medical use of medical cannabis;
  11. The law prohibits smoking and vaping medical cannabis in a public place or in a motor vehicle;
  12. The law prohibits operating, navigating, or being in actual physical control of any motor vehicle, aircraft, train, motor boat or other conveyance in a manner that would violate state or federal law as a result, in whole or in part, of that individual’s medical use of medical cannabis; and,
  13. The law does not create a private right of action by an employee against an employer.

Mississippi employers should review the law to determine whether any revisions to drug and alcohol testing policies or other workplace policies will be necessary.

Article By Kathryn J. Russo of Jackson Lewis P.C.

For more cannabis legal news, click here to visit the National Law Review.

Jackson Lewis P.C. © 2022

New Poll Underscores Growing Support for National Data Privacy Legislation

Over half of all Americans would support a federal data privacy law, according to a recent poll from Politico and Morning Consult. The poll found that 56 percent of registered voters would either strongly or somewhat support a proposal to “make it illegal for social media companies to use personal data to recommend content via algorithms.” Democrats were most likely to support the proposal at 62 percent, compared to 54 percent of Republicans and 50 percent of Independents. Still, the numbers may show that bipartisan action is possible.

The poll is indicative of American’s increasing data privacy awareness and concerns. Colorado, Virginia, and California all passed or updated data privacy laws within the last year, and nearly every state is considering similar legislation. Additionally, Congress held several high-profile hearings last year soliciting testimony from several tech industry leaders and whistleblower Frances Haugen. In the private sector, Meta CEO Mark Zuckerberg has come out in favor of a national data privacy standard similar to the EU’s General Data Protection Regulation (GDPR).

Politico and Morning Consult released the poll results days after Senator Ron Wyden (D-OR) accepted a 24,000-signature petition calling for Congress to pass a federal data protection law. Senator Wyden, who recently introduced his own data privacy proposal called the “Mind Your Own Business Act,” said it was “past time” for Congress to act.

He may be right: U.S./EU data flows have been on borrowed time since 2020. The GDPR prohibits data flows from the EU to countries with inadequate data protection laws, including the United States. The U.S. Privacy Shield regulations allowed the United States to circumvent the rule, but an EU court invalidated the agreement in 2020, and data flows between the US and the EU have been in legal limbo ever since. Eventually, Congress and the EU will need to address the situation and a federal data protection law would be a long-term solution.

This post was authored by C. Blair Robinson, legal intern at Robinson+Cole. Blair is not yet admitted to practice law. Click here to read more about the Data Privacy and Cybersecurity practice at Robinson & Cole LLP.

For more data privacy and cybersecurity news, click here to visit the National Law Review.

Copyright © 2022 Robinson & Cole LLP. All rights reserved.

Legal Considerations for Ready-to-Drink Cocktails

The ready-to-drink cocktail or “RTD” category has exploded in recent years, and it’s occupied by more than merely craft distillers familiar with a carefully made cocktail. Brewers, distillers and even vintners have joined in, capitalizing on consumers’ desires for pre-made, no-fuss beverages. The most unexpected development to emerge with RTDs, however, is the legal complexity surrounding these products—something the industry is only beginning to understand.

Many of these legal issues stem from the fact that the legal regulatory landscape in most states has not caught up with the rapidly evolving alcohol industry. That leaves ready-to-drink cocktails, much like hard seltzers, as not having a specific class or type in certain states. Suppliers looking to enter the space have plentiful options when creating a new product, subject to what licenses the manufacturer holds and what those licenses allow them to produce.

Ready-to-drink cocktails can be spirits, malt, sugar, cider or wine-based. The base of the RTD product, nonetheless, is the key federal factor. It is also an important factor in most states when determining how the product will be treated from a legal perspective in the following areas:

  • Licensing needed to manufacture, distribute and sell the product;
  • Applicable franchise law (Do beer franchise laws apply to low-proof spirits?);
  • Available channels of distribution (Can you sell this product in grocery or convenience store?);
  • Excise tax rate charged to the manufacturer (Does state law have a lower excise tax rate for low ABV products?);
  • Labeling and advertising considerations (Is your product a modified traditional product?); and
  • Trade practice considerations/promotions (Do spirits laws apply?).

Industry members dabbling in a sphere that is relatively new to the market, state regulators and legislatures should be mindful of the patchwork of emerging regulations. Like hard seltzer, ready-to-drink cocktails are not a clearly defined category under existing alcohol law. Meanwhile, states are working quickly to legislate in this domain. New Jersey is considering a reduced alcoholic beverage tax rate on low-ABV liquors to align with the beer tax rate (NJ SB 701), Vermont is considering legislation to define “low alcohol spirits beverage” and treat it as a “vinous beverage” (VT HB 590) and the Washington State Senate has a bill pending that would establish a tax on low-proof beverages (WA SB 5049).

From franchise issues to excise tax, the issues discussed here are only a glimpse of the nuanced and complicated legal landscape that governs the distribution of RTDs and alcoholic beverages across all categories.

Article By Nichole D. Shustack and Isabelle R. Cunningham of McDermott Will & Emery

For more food and beverage legal news, click here to visit the National Law Review.

© 2022 McDermott Will & Emery

“Key Legislative Limits to Nuisance-Based Attacks on the Right to Farm Live on.”

The North Carolina Chamber of Commerce, through its “Ag Allies: Landscape-Shifting Legal Developments” webinar on August 18, 2021, featured North Carolina’s Right to Farm Act (the “Act”), and appropriately so, as it has been at the forefront of North Carolina law and politics over the past few years.

Agribusiness is the backbone of the North Carolina economy, accounting for 17.5 percent of total jobs and having a total estimated economic impact of over 95 billion dollars in 2019 alone.  The evidence suggests that this impact has, despite recent challenges, only grown since then.  However, the agricultural operations that make up this market have a unique impact on the land and on their neighbors as noise, odor, storage, and dangerous equipment and structures are all unavoidable parts of agriculture.  These effects are compounded by the fact that many agricultural operations are located in rural areas in close proximity to residential zones.  This mix has long resulted in tensions, and those tensions can come to a head in lawsuits for nuisance.  “Nuisance” is a legal claim that allows for the recovery of damages for unreasonable interference with the use of one’s land.

This presented a particular problem for North Carolina agricultural operations, especially meat production.  These and other agricultural operations were deemed too valuable to be left subject to nuisance actions without some protections, and the North Carolina General Assembly sought to help by passing the Act in 1979.  Its stated objective was to decrease losses to the State of its agricultural and forestry resources by curtailing the situations in which agricultural and forestry operations could be deemed a nuisance.  The Act featured prominently in the recent mass nuisance litigation brought by over 500 plaintiffs against Murphy-Brown/Smithfield and the threat that future litigation like it presented for the State’s agribusiness industry.  Ultimately, the Act did not serve to protect the defendants from substantial jury verdicts, prompting the General Assembly to revisit and strengthen its protections.

The Act received boosts from the General Assembly through amendments in 2017 (capped recoverable damages to the fair market value of a plaintiff’s property) and in 2018 (narrowed who can bring a nuisance lawsuit against a farm and the time in which they can bring a nuisance suit).  But these boosts were not without opposition.  In 2019, three non-profit organizations filed suit challenging the 2017 and 2018 amendments.  The organizations argued that the amendments, on their face, violated North Carolina’s Constitution.  Facial constitutional challenges require proof that the law in question is unconstitutional in all of its applications.  A court cannot strike down the law if there is any “reasonable ground” to uphold it.  Finding the organizations had failed to state a claim, the trial court dismissed the organizations’ suit.  After their challenge was dismissed, the organizations appealed their case to the North Carolina Court of Appeals.  In upholding the trial court’s dismissal of the organizations’ suit, the Court of Appeals held that Plaintiffs’ had failed to state a legal claim and that the amendments in question do not violate North Carolina’s Constitution on their face.

Here are the highlights of the arguments presented in the appeal:

  • The organizations argued on appeal that the amendments violated private property rights under the Law of the Land Clause contained in the State’s Constitution, which prohibits a person from being deprived of life, liberty, or property except as allowed “by the law of the land.”  The Court disagreed.  It found the amendments to be reasonably necessary to promote a public benefit (through limiting nuisance claims against the State’s agricultural and forestry operations).  It also determined that the amendments’ interference on property use rights to be reasonable.
  • In response to the organizations’ argument that the amendments exceeded the authority of the State’s police power, the Court pointed to North Carolina’s historied interest in preserving and promoting agricultural and agricultural-related industries and found the amendments to be within the scope of the State’s police power.
  • The organizations also argued that the amendments violated the fundamental right to enjoy property.  In disposing of that argument, the Court noted the organizations had not alleged a taking by the government and reiterated its conclusions regarding the facial constitutionality of the amendments.
  • Another provision of the State’s Constitution at issue in the appeal was the prohibition on the General Assembly from enacting local, private, or special acts (as opposed to generally applicable laws) concerning the abatement of nuisances.  The organizations took the position that the amendments provide private protections to the hog industry.  The Court disagreed, noting that the amendments generally apply to the agricultural and forestry industries and are not limited to a particular subset of those industries or groups within them.
  • Finally, the organizations asserted that the 2017 amendment, which capped recoverable damages, violates the constitutional right to a trial by jury.  In rejecting their position, the Court cited the General Assembly’s power to modify the State’s common law by statute to define what remedies are recognized by law.  The Court then pointed to statutory caps on recoverable damages that the General Assembly had enacted for other civil torts.

In affirming the trial court’s dismissal of the organizations’ lawsuit, the Court delivered a “win” to the State’s agricultural and forestry industries by upholding the amendments’ limitations on nuisance claims.  Only time will tell whether the win it delivered will stay on the books.  The Court’s ruling was limited to considering the facial challenges the organizations had presented in attacking the amendments.  The Court was not tasked with evaluating whether the amendments would withstand an-as applied constitutional challenge, and it remains to be seen how the Court would rule if asked to consider an as-applied challenge.  Still, the ruling is an encouraging nod to the important role the agricultural and forestry industries play in North Carolina and the State’s interest in protecting those industries.

© 2022 Ward and Smith, P.A.. All Rights Reserved.
For more about North Carolina law, visit the NLR North Carolina jurisdiction page.