ALC - Medical Marijuana Oversight subcommittee
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- October 2, 2026
Senator Ronald Caldwell
Unverified
4:06
Members if you would please take a seat it's already 9:33 and we will get started I call this subcommittee of the ALC medical marijuana subcommittee to order my co-chair Representativehawks has called and he's running a little bit late and I'm assuming he had to stop at Bucky's on his way up here. since I have no comment he's not here for a comment. we'll
move to item C and rules governing the application for issues and renewal of license of medical marijuana cultivation facilities blah blah blah ri s ie are you here? I know that's all right. Well my co-chairs here I will ask him if he has any comments he does not Thank y'all for being here if you would please identify yourself for the record and you're recognized.
Speaker 8
5:20
nurse came on oh ok good morning I'mrie Lorigan I am the regulatory administrator for the regulatory division which
Speaker 10
5:31
is ABCmmC ATC and the racing commission. And I'm Katty Innojosa. I'm the assistant administrator
Speaker 12
5:39
head of legal for the regulatory division also over the
Speaker 19
5:52
it's not there we go. Brandon Crawford staff attorney for ABC.
Speaker 21
6:00
thank you christy you recognize there we go. good morning so we are here
Speaker 8
6:14
with rules today what we colloquially referring to as the management rules the whole point of these rules which did
go through several versions and at least two public comments is to make sure that ourkansans have control over the companies that they have licensed here within the medical marijuana industry when the which was before our time but when the first medical marijuana licenses were issued obviously there was law that said60% of the ownership needed to be with ourkansans but they didn't necessarily know how to run a marijuana business because it was brand new so there were a lot of management companies that were coming in from out of state
and they were called management companies but what they actually were doing was every single thing that the license allows an Arkansas owner to do so the
Speaker 24
7:00
point of these rules was to make sure that the control lies with the licensed entity and not with any out of state actor who might come in and end up seeing all the profits or controlling all the day to day operations beyond general management. that exchange your comment
Senator Ronald Caldwell
Unverified
7:24
umm'm I'm just asking OK I I saw your head shake yes ok committee any questions? Representative thank you Mr Chair. so I know as you
Representative RJ Hawk
Unverified
7:39
mentioned that there's been multiple of these rules that have gone through and much before your time. my question is so have the if the rule have the rules changed at all from what previously cause I know there
was some discussions on people that got an application in the last go round and they they think that they're may they may still have some some rights to that application or is this are these rules putting in place so where if somebody applies now
it's a new fresh slight of applicant applicants for a new dispensary or a grower or whatever that
Speaker 24
8:19
might be. you are referring to our licensing rules which is obtaining the application we're here on management rules today
which is simply giving the medical marijuana commission the ability to review management contracts that
Speaker 8
8:32
our current license holders enter in with out of state. We are not here today on licensing rules. licensing rules would be what gets out any remaining licenses if the medical marijuana commission decides to open up and I'm glad you clarified that so these
Representative RJ Hawk
Unverified
8:46
are just the management side there isn't just so nobody we get any emails or
anything this has nothing to do with the applications themselves and we appreciate that distinction too.
Speaker 8
8:58
this is this is about management companies licensing rules are something totally different there will have to be a set of licensing rules that is passed in order to get any of those additional licenses out the agency is
Speaker 24
9:08
not quite there yet but that is in the works in in some respectsome thank you thank you
Representative Jack Ladyman
Unverified
9:20
Representative Lederman thank you Mr Chairman. I'm over here. you said you had two public comment periods I think you said that you know
there's been a lot of merging and buyouts and that sort of thing in this business since it started did you get any public comments was there any concerns and could you kind of summarize some of the
more prevalent comments and I think we'll have some comments here
Speaker 8
9:46
today as well which are pretty similar to comments we've heard in the past. There was a general argument that what we experienced in the beginning with these out of state management companies coming in and showing everybody how to do
the job that that's not really happening anymore because now as the industry has matured each individual license is now being run more efficiently and they don't need those out of state companies anymore. So I think the general argument from the other side of things was this is not a problem anymore so we don't need these rules to solve it. I do believe we also had some public comments that had to do with commercially reasonable that is a legal term of art that is used very frequently to make sure that we know what makes
sense for that industry so what may be commercially reasonable for a medical marijuana dispensary may not be the same for a liquor store which ABC also regulates so what we did was instead of giving finite rules of the management company cannot contract over x amount of dollars insteadad we said the management company cannot contract in an amount that's not commercially reasonable so that way we can hear from the industry what is the standard so that way it's not just the medical marijuana commission we're actually looking at the
Speaker 24
11:02
industry as a whole to try to determine what makes another question
Representative Jack Ladyman
Unverified
11:08
if I might. and you may not be able to answer this maybe it's not related to to what we're talking about here but there's a lot of movement especially in Jonesboro where I live. people moving across town or moving out in the county or whatever so has there been a lot of movement from certain parts of the state with these growers or the these
people in this business or are they concentrated in a certain area? I'm
Speaker 45
11:37
going to say there is frequently movement but in that area specifically I hope I'm not putting him
Speaker 24
11:42
on the spot but Brandon is our staff attorney who works in receiving those applications for transfers of location so maybe he would have a little bit of insight. Brandon, sure just for clarity are
Speaker 20
11:51
you talking about the the facilities moving or are you talking about people moving? facilities right ok yeah we have had I'm trying to think of the last
transfer application or location change for a cultivator Yeah it was definitely in pine bluff we have one county that has two cultivators a couple of counties, few counties with one outside of that obviously it's mostly zero but there hasn't been a lot of movement since inception of you know the market so these facilities are expensive to build and so once they build them out they generally stay put. Can you address that for the distributors?
distributors are they moving around from state from so we have cultivation facilities we have dispensaries dispensaries I'm sorry dispensaries move frequently. I mean they're tied to their zone but they have bounced around that you know don't know that there's necessarily any method to that but as long as they stay within their zone they're entitled to move so they several of them have yes but they've stayed within that zone yes sir thank you p re s ent ative Steele
Representative Tracy Steele
Unverified
13:10
thank you Mr. Chairman. Not not quite sure what I can and ask and cannot so you guys rein me in if I'm I'm not within the agenda and I probably should asked Representativeozzar about this but do we still have a cultivation facility that is taking applications in the hot springs area that we what happened with that and does that have to stay while
Speaker 56
13:35
you're answering it in the hot springs area. So what believe
Speaker 24
13:42
you're referring to is there was a revocation of a dispensary license in the hot springs area. There also was a dispensary license in that zone that was never issued so hypothetically there could be two dispensary licenses within that zone if we pass those licensing rules that I was talking about earlier which is a separate set of rules once those licensing rules are passed it will give us information on what do we do one of the licenses we've revoked and what what happens when that
reverts back to the state how that gets issued so that was not addressed in the previous rules which is part of the reason why we need these licensing rules to clear that up but right now that lawsuit is not completely resolved. It was a two pronged lawsuit. there was a revocation that the permit holder was fighting and there was a non renewal that the permit holder was fighting. The state has been successful in the AG's office helped us out make sure that we did the right thing on the revocation but it is not yet decided on the non renewal we
expect we will be successful and that license will revert back to the state but until we have those licensing rules there's nothing at play in Ho
Speaker 57
14:52
Springs right now and if it reverts back to the state
Speaker 24
14:56
then what's the next step is it is getting licensing rules passed which will provide a mechanism for the medical marijuana commission to get that license. So in the past it was a scored application and there were some issues with how that those scoring was done
by an outside thirdpar. This time there's probably going to be a
Representative Tracy Steele
Unverified
15:19
different mechanism for that one quick follow up Mr Chairman if I could. just in general how has the federal rescheduling impacted the our marijuana medical marijuana system herell let Katy and a hosta take that one she is our head of
Speaker 24
15:31
legal and she also came to us from the federal prosecutor's office so she has a little bit of insight well
Speaker 12
15:37
and I don't have a lot of information because there hasn't been a lot of changes on the state end. we are still regulating in the same mechanism
that we were. I cultivators are registering with the DEA and having those inspections done but they have not affected our state regulatory ag Thank you Senator Petty. thank you Mr Chair. thank
Senator Jim Petty
Unverified
16:00
you Mr Chair. umm hoping that maybe it's just me but could you clarify as I was preparing for this and reading the rules it said I got the feeling that this was
new but then something was said earlier about some some exi when when it first rolled out, maybe there were some rules maybe they just weren't formalized or is this the first swipe at
Speaker 66
16:26
official rules for this subject to make it to ALc yes sir I think
Speaker 24
16:31
there was a lack of rules before and that's what I think I was getting at was we didn't know that management companies were gonna come in and start taking control because we werebra the state was brand new to the industry. now that we've realized they did come in and start taking control
we found the need for these rules. I think the counterargument is well that issue it's not
Senator Jim Petty
Unverified
16:54
here anymore because we know what we're doing now OK and one follow up Mr chairir and so with these rules if they go into effect how many of our participants Arkansas participants that have contracted out, to outside parties are going to now have to immediately take over themselves versus they're already doing it now anyway they've already terminated that do contracts
early on. What do you have a feel for
Speaker 24
17:21
that so that is a good question. I don't have an exact number for you but it's not that these rules kick the management companies out. These rules just require that we see the medical marijuana commission sees the contract so that way we see if there's a term that's not commercially reasonable which gives undue control to an outside entity and not the license holder right thank you I have a question are these contracts used both in the
Senator Ronald Caldwell
Unverified
17:49
dispensaries and the growers or just in the growers I believe they're used in both in both OK. any other questions if not thank you for your time we have some others to come to speak and I may call you back we'll be here thank you Mr. Pascal
If both of does not on punch your button if you would introduce
Speaker 75
18:29
yourself for the record and you're recognized good morning I'm Bill Pasco I'm here before you this morning as the executive director of the Arkansas cannabis Industry Association which represents the growers processors the
Speaker 76
18:40
retailers and all the ancillary support businesses and I'll let Mr. Bauer introduce himself. Good morning y'all. Eli Bauer I' m an attorney at right Lindsey
Speaker 78
18:50
and Jennings. I'm here today as counsel for ACIA
Speaker 80
18:58
so thank you for allowing us to talk to
Speaker 76
19:02
you today about this proposed rule as director Lorgan mentioned it has gone through a few revisions we will tell you it is in a much better place today than where it once started and we very much appreciate uhrector Lorigan and her staff and their willingness to work with us they've they've been great to do that. However, we haven ' t gotten to the point yet
where our industry is comfortable we think there's still some issues that need to be resolved or clarified. before we get into the specifics I want to give you a a brief history of the industry, which I think has relevance to this management contract rule. so most of you know the industry cranked up and 2018. and when it started, as director Lorgan mentioned,
the Arkansas licensees did not have institutional knowledge. as director Lorgan mentioned, the Arkansas licensees did not have institutional knowledge. the rules and laws called for60% ownership by Arkansans. so a lot of these folks won licenses and they have never been in the marijuana business before. so they did contract without a state firms to help them learn, and help them get an understanding how to operate
a medical marijuana business effectively and efficiently since 2018 the industry's grown we have we now employ somewhere between 20 and2,500 people. average annual sales are just at300 million dollars annually and we generate about35 million dollars a year in state taxes and most importantly we have
just fewer than 120,000 patients that are now participating in the program and the industry has learned and grown, we've become less and less dependent on out of state management companies and today to my knowledge there is not one out of state management contract in Arkansas, not one. so asrector Lorgan made my speech for me we I guess are
questioning whether this rule is needed or necessary the industry is matured and they've the folks that have the licenses here in Arkansas have learned how to run and operate their businesses and in doing so they've pushed those out of state management companies back home. So we in an era of less government and fewer regulations this seems kind of fly in the face of that given where we stand now and that ourkansas seems seem to be doing
a really good job of managing this industry. and those are my overarching thoughts. I'm going to turn it over to my legal counsel here to let him tell you about some specific concerns we
Speaker 77
22:20
have about the language thank you Bill and good morning to you all.ppreciate your time this morning. Bill touched on
Speaker 78
22:26
it briefly but before I get into the the substantive legal issues that I see with these rules the operational concerns that these rules are likely to cause is is enormous these management contracts the definition of man
contract is is fairly broad in these rules so there is some some uncertainty for the industry of really what contracts have to be submitted for for consideration you all may know this but the commission meets once a month. the agenda is set a month before that. these rules require that that a management contract be submitted and that it's effective date be after the commission approves the contract. so you know these contracts oftentimes are are are pivotal for day to day operations and we're looking at
a two month lag time for commission approval for some of these contracts which is is is enormous for an industry in almost certain to impact patient care at some point but but I'd like to spend most of my time this morning, discussing the the legal issues that I see with these rules of which I think are material and would subject these rules to to pretty serious review by court if someone chose to to argue that these were unconstitutional
so the primary issue and what the framework with these rules is commercial the term commercially reasonable. so the commission will look at these management contracts and determine whether or not they believe that the terms of the contract are commercially reasonable. you all probably know that's a term that's used all the time when private parties are contracting. it's used daily. courts often look at the at the term commercially reasonable and determine whether or not a contract should be upheld based on that standard. The problem here is not whether or not we know what commercially reasonable means
but it's who is making that decision and based on what standard thek Arkansas courts have have frequently said that the general assembly can can delegate administrative authority to agencies as long as that that authority is is not absolute unregulated or undefined. here the term commercially reasonable by its very nature is ambiguous. it's vague and ambiguous and allows the commission to bake in their own personal feelings and opinions about whether a contract should be upheld
because it's not a concrete standard this is is an issue for the industry frankly because of uncertainty but also not just the industry but the people that they're contracting with as well. in practical terms two applicants can submit a contract with substantially similar terms in it and one can be upheld based on you know a subjective based on opinions and feelings of the contract by the commissioners while the other one is struck down resulting in a discriminatory
impact that is just compounded by commissioners rolling off over the life of the commission those opinions and feelings change over time. ABC staff may change interpretations within the within the agency may change only resulting in in further uncertainty for the industry the two from a very high level, the two primary constitutional issues that I see with these rules are an unconstitutional delegation of power to to the AC
agency or to the MMC so in this case ammendment98 grants no authority whatsoever for the commission to to review private contracts and todd to determine whether or not they are reasonable and whether or not they should be upheld an agency does not have the ability to create these standards wholesale without a concrete standard set in place by a statute. Here amendment 98 does not give that. There there is no no framework for this. Second is the fair notice and arbitrary enforcement concerns businesses industry
in the state has the right to know based on fact a concrete standard whether or not a contract that's submitted for commission review will be approved or not as I mentioned there's going to be quite a bit of lag time between negotiating a contract and it becoming enforceable and effective based on the commission's approval and at this point because of the arbitrary the the subjective standard baked into commercially reasonable frankly industry can't know whether or not a contract will be acceptable and
enforceable or not and it won't for a couple of months until the commission rules on on that because of those things we would ask that at the very least a final rule have some sort of concrete standard if if these rules do move forward as Bill mentioned you know this is already if not the most highly regulated industry in the state one of the most highly regulated industries in the state adding additional red tape where frankly the problem doesn't exist anymore is
is troubling to the industry and of course is is likely to result in operational concerns. so one final brief brief point is these rules do require that certain provisions be included in every contract. for example both parties must have the right to terminate at any time with notice another example is both parties must have the right to renegotiate terms of contract terms of the contract at any time at arm's length. these
are not terms of any contract in any industry that I would consider standard and certainly the commission does not have the have the authority to impose those requirements on private contracting parties so I
Speaker 77
28:01
appreciate you all's time and your consideration this morning. members says icky Hill you
Senator Ricky Hill
Unverified
28:13
gave a broad overview on that you took saying it was unconstitutional and stuff can you go back in here and show us
and tell us what page and where you think this is as unconstitutional is it just a broad overview because we're gonna say it's unconstitutional sure are we saying everything
Speaker 78
28:32
is that's here or let's let's be specific on that. So on page two the definition of commercially reasonable that's a that is the industry's primary concern with these rules. its because the commission does not in our opinion have the authority to determine whether a contract is commercially reasonable. so that's page 2 2CAR800102 the new subsection4
and then beyond that the entire let's see what section that is kind of go slow for us so I'm trying to find it as we're going through here Sure sure sure so so the the primary concerns are with the commercially reasonable standard as as director Logan noted management contracts are already provided to the to the commission to ABC staff. they already see those the concern at this point is the commission does not have the authority to
to determine whether or not those contracts are reason able and then decide whether or not those contracts should be enforceable or not. do you have a better word to use there besides a commercially reasonable well frankly I am of the opinion that the commission doesn't have the ability to to determine whether these contracts are are enforceable or not anyways that that simply doesn't exist in in Amendment98. thank you thank you er Petty
Senator Jim Petty
Unverified
29:54
thank you Mr chairir. just following up from what Senator Hill was saying. so we you started out you and and Bill talking about the industry being mature, it's grown and and quite frankly I think if I'm using the words right the problem just doesn't exist and it's basically not needed and and then you get into the unconstitutional which I I'm might argue I'm an attorney, I might argue that we're going through
exactly what 98 allows us to do which is you don't want me determining what commercially reasonable is we're going to delegate it to those that are in you know in that in daily but if it's if it's a problem that doesn't exist and and it's a mature industry and and quite frankly I don't know that I necessarily agree with a commercially reasonable comment that you made because it is used every day and virtually every kind of contract that I've ever seen dealing with these types of issues across multiple industries and
so I think if it's a mature industry you probably do have you know commercially reasonable and and easily determinable what those what those terms are but if if the bottom line is this if if all of the Arkansas, companies are already doing it themselves anyway then why are they concerned? I mean my concern would be yes it's not a problem today but with venture capital and and private equity and all of that they could come in and and own
half of the state or all of the state before we had a time to react to that
situation occurring. So do you have any comments about, I mean you heard by my
Speaker 75
31:39
comments my answer's a simple one. why do we need a new regulation if if
Speaker 76
31:45
if it's not needed why are we adding another regulation, another hurdle on and to your perspective question, you know there's there's a lot going on on the federal level right now. with rescheduling there's a current
public comment period open on rescheduling marijuana, medical marijuana has been rescheduled tochedule3 but if marijuana becomes rescheduled there's some question as to what that does to interstate commerce and how you know states are going to deal with marijuana flowing between borders and this may be all moot if that that were to happen love
Senator Fredrick J. Love
Unverified
32:32
thank you Mr Char and I want to continue with with what my two colleagues are saying because I hear you say that the agency doesn't have the authority but who then then who should or who does have the authority? I'm trying to catch up with this. So at this point amendment 98 does
Speaker 87
32:49
not give the authority to the commission to review these contracts and determine whether or not they should
Speaker 78
32:54
be enforceable. at this at this point no one has that authority it's not it's not been vested in any statutory author
ity The agency is limited to to the power that is given to them under the under the the vesting statutes so does the
Senator Fredrick J. Love
Unverified
33:09
general assembly have the authority you're saying nobody has the authority the two the two parties the
two parties have the authority so at this
Speaker 87
33:18
point at this point if a contract, if two contracting parties, one of them felt that the terms of the
Speaker 78
33:24
agreement was not fair. They would of course have the ability to bring a lawsuit in whatever county they're in and ask a court to make a determination that the contract is
unenforceable based on commercially unreasonable standards at this point we
Speaker 77
33:37
are now asking for the state to be involved in that where the two parties are are operating without a complaint. all right that right
Senator Fredrick J. Love
Unverified
33:45
that that clears up some things so centered love we have had some
Speaker 103
33:49
of those lawsuits in the state. OK so we have
Senator Fredrick J. Love
Unverified
33:52
we've had some of those lawsuits and they they've all to
Speaker 103
33:55
my knowledge all been resolved but we have had those to clarify right good deal
Senator Fredrick J. Love
Unverified
34:00
thank you. Now let let's go back up to your commercially commercial
ally reasonable standard right? and I'll listen to how long has that I guess how long have we utilized or how long has that that term been around not just as it relates to to this situation but commercially reasonable how long has that term been around? so don't know the exact you
Speaker 78
34:25
know the creation and in Arkansas law or anything but that that is a term that is used frequently courts have upheld have have used commercially reasonable
standard to determine to look at contracts it's it's been a long time does that answer the question does
Senator Fredrick J. Love
Unverified
34:44
but'm just trying to let me
Speaker 107
34:46
add on to that and from the nonlawyer here generally commercially reasonable is determined by a court of law correct not administrative
Senator Fredrick J. Love
Unverified
34:55
body ok and so the the objection here is the use of the term being inserted
like like I'm trying to figure out your arguments
Speaker 78
35:14
it. So so the crux of the argument is commercially reasonable is a subjective standard. it it's bas it's not based on a concrete set of facts of if this then unreasonable and unenforceable commercially reasonable allows will allow the commission under these rules to look at any number of things not a set number of six factors and say if these if3 of6 exist then it's unenforceable. It's simply
if it feels unfair to the commission, then it will be commercially unreasonable. The the problem with that for the industry is without knowing what the set concrete standard is they will never know whether or not a contract is an unenforceable or why it's not frankly. so and let me add on by saying these rules they do at times lay out a couple of concrete examples of this is when a if this exists then it will be unenforceable, which I think is great for the industry
and if if these rules are going to proceed that's very helpful. The problem is it says that the commission may consider these list of concrete factors among other things. The among other things allows the commission to consider factors that who knows? I mean I think we know what they are today but the commission could could change interpretation in the agency could change and then who knows? So the the issue is the uncertainty of what is in fact reasonable.
Speaker 111
36:38
all right thank you thank you miss thank you Mrirpresentative Hall thank you Mr. Chair. Thank
Representative RJ Hawk
Unverified
36:43
you guys. I've got a couple questions and Mr She when we get done if we could havertie come back to the table I'd like to ask her a
few questions. first Bill, you said earlier that right now there's no management companies in the state no out of state so there are manage because then I heard you say that they review management contracts so what you said there's no out of state management company of the last one I was aware of was with a
Speaker 114
37:08
dispensary in El Dorado and they're now run by an Arkansas company so
Representative RJ Hawk
Unverified
37:12
guess if there are instate management companies with these rules apply in your opinion to the instate ones
as well as this just for out of state management companies
Speaker 78
37:22
it's it is all and in fact it's not even just management quote unquote management companies that part of the issue is the management contract definition is much broader than just who's running the store it's who's doing payroll who's who's buying who it's very broad but yes it
would also apply to instate operators inre representativehack
Speaker 75
37:44
and again thank reprector Logan and her staff because when this was first drafted the definition of contract was wide open and it was really really scary
Speaker 76
37:53
and horrendous but they work with us to narrow that definition and make this better we are still pretty much just hung up on the commercially reasonable language and and I I completely understand that as
Representative RJ Hawk
Unverified
38:06
somebody that deals with contracts every day
in the real estate world I understand that what I would say though that when we talk about commercially reasonable in subsection i on that that page page two that you you talked about you goi and then goes A B it kind of defines commercially reasonable in the rules right there doesn't not like when it says the commission made to determine whether a term is commercially reasonable or consistent with fair market value generally applicable to the current valuation of similar interest service or product in the Arkansas medical marijuana market and that goes to be talks
about the current valuation of similar interests like to me I'm the lawyer so I'm not trying tot I didn't play one on TV but I will say
that it to me seems like they have defined commercially reasonable in in the in the rule is it not
Speaker 78
38:56
so they they have and we again appreciate staff and and the commission's efforts to do so. the problem is in in my opinion it still bakes in enough uncertainty for the commission to to consider other factors rather than just these. OK.
Senator Jim Petty
Unverified
39:11
thank you. Senator Petty thank you Mr chairir. I I I think that's what I'm hearing from those that are not attorneys that didn't play one on TV last night. I think commercially s reasonable is not a subjective as as as maybe the concern that you're expressing. we'll we'll just agree to disagree on that but I would be interested in your
comment on the the reason when we passed the medical marijuana, there were reasons behind limiting the number of of facilities or dispensaries wanting individual could own. we have that same thing in my real estate profession but I I understand I think the concern is, well, I can only have 8 but I can wink wink have 8 more over here I'm doing everything and then you know,
Representativehawk doesn't have to do anything and he gets, you know,5% or whatever. I'm just making this up. So I think there's also a protection of the integrity of of what we passed that's at play here too and so I I am an anti as much as possible regulation but if if I was reading this morning I wish I could quote it but if we were all honorable we wouldn't need you know, any regulations. so and I'm not saying anybody in your industry is not honorable. I know a
number of them and they all are. but but any comment on on that aspect of it from from the industry perspective and guarding against monopoly disguised through management contracts. Yeah, I I know
Speaker 107
40:58
where you're coming from there and as Elis mentioned andrector Loorgan mentioned the
Speaker 76
41:04
management contracts have to be filed with the state now. so we know who's out there and has those it's it's not a secret
Speaker 75
41:18
we think we've covered it and that that the current law is taking care of itself
Speaker 76
41:25
because they're already filed this just seems to be piling on again at a time when this body and federal cones seemed to be moving the other direction in less regulation smaller government this seems to be flying in the face of that and adding regulation where again the industry seems to have corrected itself over time as
it has grown and and there's been more institutional knowledge and that's why you don't see out of state folks here which was the concern and this conversation about management contracts has been going on for years and that's where this bubbled up frankly and there were some lawsuits back in the day where some folks sued dispensaries that were being managed by out of state contractors. and that's not going
Speaker 75
42:16
on in Arkansas any longer our folks have learned how to run these in this
Speaker 76
42:22
industry and the licensees or do a great job day to day in managing that and we're you know we're concerned that this opens could open a window definitely create some uncertainty there and and it goes beyond just those management contracts. how does this you know, affect other broader contracts and is it the state's role administrative body's role to determine whether those contracts are legit and viable.
Senator Ronald Caldwell
Unverified
42:58
have one question on the contracts right now are they confidential if you sign a contract for instance with your payroll people you may you brought that up a while ago with are are those confidential contracts where they made public? No you you could they're subject for you that's it fair enough so it's not gonna if if we present that same contract to the commission where it would be made public there we're not
going from a confidentiality issue to a public knowledge issue the the one
Speaker 78
43:34
thing I'm not sure about that we we may need the director's opinion on or her her staff's thoughts on I'm not sure if some of the financial aspects of it may be confidential. they if you're calling Director Lorigan back up here you may confirm that. I'm not sure I know the contracts themselves would be subject to foia but there may be some aspects of it that are kept confidential. I'm not sure from that perspective. Senator Ricky Hill
Senator Ricky Hill
Unverified
44:04
heard y'all I've heard y'all talk about rule change and told us all the things you you agreed with and what you disagreed with. Tell me how if this rule passes it will be detrimental to your industry. will it be detrimental? is it going to be henny penny is the sky falling what
Speaker 75
44:21
what's the scenarios that's a big question senator it's uncertain we we don't know who
Speaker 76
44:25
might be making those decisions and determining if a commerci if a contract's commercially reasonable or not. do I have faith and confidence in the current
administration and the folks running, yeah, they're great. they're great to work with but you know, I'm guessingrector Lorigan won't be here40 years from now or 20 years from now and you know who knows who will be
Speaker 75
44:45
on the medical marijuana commission. you may be the chair, I don't know you know somewhere down the road you I won't be the chair, I don't know you know somewhere down the road you I won't beres representative hawk in his next life. so
Speaker 76
44:57
you know it's the uncertainty there for us that it really raises questions and then the lag time
in you know, having one of these contracts reviewed and approved by medical marijuana Commission which could cause some operational issues that uncertainty that you talk about is that not the same
Senator Ricky Hill
Unverified
45:15
type of uncertainty that when you're cultivators first apply for license and we're ordered the license did they not have uncertainty at that point as well? yes sir and that's why they brought in people that had knowledge
Speaker 103
45:26
and that that's why now that they've learned how to run those. they've pushed those people out of the state thank you
Senator Ronald Caldwell
Unverified
45:37
seeing no other questions thank you all very much for your time for your comments thanks everyone rack your whip and get them up here OK you're on
Speaker 24
46:08
well I I appreciate the conversation I think they're it's hard for me to reconcile that it's no longer a problem and it's also pivotal to day to day operations. that that's a little tough for me to get get around also as far as commercially reasonable to to a lot of your point it has been used for decades in a lot of different contracts and and like I mentioned earlier it's commercially reasonable within that industry. what may be commercially reasonable in the alcohol industry is not the same as
Speaker 8
46:35
the medical marijuana industry. and the medical marijuana commission hears month in and
month out from these industry members. So I I do think as the regulator this makes sense because they know exactly what would be unreasonable in that industry and we also I'm sure they would attest are always open to hearing comments from the industry at our meetings they're there would not always be just the commission sitting up there5 people saying yes or no. there's often public comment and people weighing in on what is standard practice Another
thing I I think I just wanted to clear up a little bit too was the unconstitutionality. ammendment98 provides guideposts for what we could do to regulate a safe and effective industry. What it doesn't do is everything that the rulebook does which is defined specifically what you can and cannot do within amendment 98. So I understand that
Speaker 24
47:31
the industry may want certainty but like I mentioned earlier if we had a rule that said the management company cannot contract over50,000 dollars on behalf of
Speaker 8
47:41
the licensee. that could be argued unconstitutional because what gives us the right to set up that arbitrary number and tell them that they can't go over it. so commercially reasonable gives us gray area which is where lawyers operate to make sure that depending on circumstances we're doing what makes sense so that's I think that's all that was kind of swimming through my mind through that argument but I believe some people may have some more questions thank you for that just some
Representative RJ Hawk
Unverified
48:12
notes that I wrote down. So I own a
real estate company that does property management right and so I'm I'm trying to relate this in in those terms. I go get an owner and they don't have to get it approved by the real estate commission to for me to manage their property right? What is the need like and once I I don't know why is the need to have the management contract reviewed by the commission
when the private owner is making the decision to get a management company. it all cedes back to control we
Speaker 24
48:43
have to have the licensees there is one individual's
Speaker 8
48:46
person's name on the license. It isn't even a business it is one individual permit holder that is the person who is ultimately responsible for any violation whether that's a suspension or revocation or a fine payment. so when you have the management company coming in and running day to day operations we cannot hold that permit holder responsible because they've now lost control. So it basically makes the whole licensing system a sham because that individual permit holder does
not have control over what is happening in
Representative RJ Hawk
Unverified
49:17
that location and that makes sense because like if I'm if I'm managing your rental property and something goes
nefarious, I get called before the real estate commission for anything that was done not you it would be made for for our management company so that I'm I'm glad you said
that last question all these rules have been reviewed and approved by the commission currently, correct? OK cool thank you Representative Steele
Representative Tracy Steele
Unverified
49:44
thank you Mr. Chairman. glad you mentioned something about numbers and I'm just curious on page six where it says the commission sale issue at least4 but not more than 8 cultivation facilities how did you get that to my understanding or memory I think it started out as5 and then it went to 8 and is it currently announced what7?
Speaker 24
50:18
believe we have 8 cultivation sites don't we? Yes, and I think that number came from amendment 98. I'm not sure that it is referenced in our management rules you
Speaker 131
50:31
may be referring to licensing rules. ig in ally I
Speaker 24
50:33
think it was was it not there are5 dispensary licenses per cultivation there are 8 cultivation licenses across the state but we do have a a ive limit on per zone I believe so I'm not sure if maybe there was
Speaker 135
50:48
a little confusion on that doesn't dispensary
Speaker 24
50:50
that think so for cultivators was it ever5? ammendment98
Speaker 136
50:54
calls for eight but only5 were issued at this
Speaker 24
50:58
time there are 8. that's my question it called for 8 but it
Speaker 131
51:02
was only5 initially that were licensed but at this point yes sir thank you Mr Chairman you. I
Senator Ronald Caldwell
Unverified
51:10
do have a question going from running a day to day operation of the business in the contract that came out that
y'all have to prove it may take up to60 days or or maybe longer to approve a contract and it goes back that they have the right to terminate in the right to renegotiate what happened I use payroll for an example a while ago what happens if if a payroll company terminates his contract and they have to hire a new payroll agency they do they have to come back and get a contract approved from the commission you you you see what I'm saying our our are are we putting
potholes out there that that really not will work in a day to day operation of the business?
Speaker 8
51:55
No, I don't believe so. First off, I think payroll is a little more detailed than than the intent of the law so I
Senator Ronald Caldwell
Unverified
52:03
am going to toss it over to the you're saying if if they hired a management
contract for payroll. that's what I'm asking now and and something went haywire with that contract and they have to contract with a new payroll company. Do they have to bring this contract back before the commission to get it approved before they can engage in that
Speaker 20
52:21
contract.'m going to ask my attorneys there is a specific exception for accounting services. I would assume payroll services would fall under that that's that's just my common
Senator Ronald Caldwell
Unverified
52:34
sense asking because we've not talked about it but you know on the day to day operation had how does this function? how does government regulation function in day to day operation of the business is what I'm trying to determine on that so go ahead what was going to say is the
Speaker 20
52:49
spirit of the rules is not to create
impediments it's to prevent the parties from including provisions in these contract s that manipulate and circumvent ownership requirements and cause market manipulation and so built into the rules is an indefinite period for review but part of the justification for that was that the parties could just submit 1000 page contract and make it so that we have to rubber stamp something within30 days that can't adequately not arguing
Senator Ronald Caldwell
Unverified
53:19
that but but you see the testimony before us
what I mentioned about the payroll could happen and now you're clearing that up that that's why I'm asking I don't want to impede business and day to day operation put them in a bi nd over red tape and and we certainly do
Speaker 24
53:37
not either to to mirror what Brandon just said this was not designed to create obstacles for them to jump over it is just designed so that we know that the control is with the license holder and the control is here in Arkansas under amendment 98 are you limited
Senator Ronald Caldwell
Unverified
53:52
in how many times you can me can you have
emergency meetings if something drastic came up we can have emergency meetings we are not limited'm just trying to clear there good senator Petty thank
Senator Jim Petty
Unverified
54:05
you Mr chairir. I promise this is the last one but just just to clarify the the you could in theory and this is what I want to understand you could in theory have a management contract but you could also have a contract separate from the management contract to do your payroll, to do your lawn, to do accounting, to do other things
and those aren't what is subject to your review it's just the management contract of the medic actual operations and and I'm glad he brought up
Speaker 24
54:37
lawncare that was something that opponents to the first draft came in and brought up I do stand by the language of our first draft that it did not touch lawncare but that was kind of one of the scenarios that they came up with if I want to change our lawnca service we got to come to the commission Absolutely not. any other questions
Senator Ronald Caldwell
Unverified
55:04
seeing none we thank you very much you you want to have a comment you don't want do not OK without objection this rule is reviewed with no other business we're adjourned
Agenda
A. Call to Order
B. Comments by Co-Chairs
C. Rules Governing the Application for, Issuance, and Renewal of Licenses for Medical Marijuana Cultivation Facilities, Dispensaries, and Processors in Arkansas [Exhibit C]
D. Other Business
E. Adjournment
Documents
No documents posted.
Speakers
Senator Ronald Caldwell
Unverified
Speaker 8
Speaker 10
Speaker 12
Speaker 19
Speaker 21
Speaker 24
Representative RJ Hawk
Unverified
Representative Jack Ladyman
Unverified
Speaker 45
Speaker 20
Representative Tracy Steele
Unverified
Speaker 56
Speaker 57
Senator Jim Petty
Unverified
Speaker 66
Speaker 75
Speaker 76
Speaker 78
Speaker 80
Speaker 77
Senator Ricky Hill
Unverified
Senator Fredrick J. Love
Unverified
Speaker 87
Speaker 103
Speaker 107
Speaker 83
Speaker 111
Speaker 114
Speaker 106
Speaker 131
Speaker 135
Speaker 136