65 Years Since In re Plainfield-Union Water Co.

On this date in 1954, the Supreme Court decided In re Plainfield-Union Water Co., 14 N.J. 296 (1954).  Along with Handlon v. Town of Belleville, 4 N.J. 99 (1950), discussed here, Plainfield-Union is one of the foundation stones of administrative law principles in New Jersey.  That opinion, like Handlon, was written by Justice Heher. This […]

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No Harm in Growing Hemp on Your Farm: Inside the 2018 Farm Bill

Last month, Congress approved the final 2018 version of Section 7607 of the Agricultural Act of 2014 (the “Farm Bill”), which received bipartisan support in the Senate. The Bill removes “hemp,” a variety of the Cannabis sativa plant species, from the Federal Controlled Substances Act (“CSA”) and legalizes hemp cultivation as an agricultural commodity similar to grain, meat, and dairy. Commentators expect the historic new Farm Bill to considerably encourage and promote innovation, development, production, and consumption of hemp in the United States. But to understand the significance of the 2018 version of the Farm Bill, it is important to take a step back and understand what industrial hemp is, what distinguishes it from marijuana, which remains a Schedule 1 prohibited substance, and what the future of hemp looks like in this Country.

The Difference Between Marijuana, Hemp, and CBD

According to the CSA, marijuana is defined as “all parts of the plant Cannabis sativa L., whether growing or not; the seeds thereof; the resin extracted from any part of such plant; and every compound, manufacture, salt, derivative, mixture, or preparation of such plant, its seeds, or resins. 18 U.S.C. § 802 (16). The only plant material exempted from the definition of marijuana is mature stalks, seeds incapable of germination, fiber produced from mature stalks or seeds, compound, manufacture, salt, derivative, mixture or preparation of the mature stalks (except the resin extracted therefrom), and oil or cake made from seeds. The new Farm Bill defines “hemp” as “the plant Cannabis sativa L. and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol concentration of not more than 0.3 percent on a dry weight basis.”

While hemp is derived from the same plant as marijuana, it contains insufficient levels of tetrahydrocannabinol, or THC, to produce marijuana’s “high” feeling for its users. Hemp is used to make a variety of consumer and commercial goods including beauty products, apparel, food, car dashboards, and building materials. Hemp can grow nearly anywhere in the world, in many types of soil — even in short growing seasons or in dry regions — and helps purify soil as well as kill some types of weeds. Hemp is also high-yield crop: one acre of hemp produces twice as much oil as one acre of peanuts, and nearly four times as much fiber pulp (for paper) as an acre of trees. Hemp has the strongest (and longest) plant fiber in the world, resistant to rot and abrasion, and was in long use before DuPont patented nylon in 1937. It was used for ship rigging, military uniforms, parachute webbing, baggage and more. A hemp composite material (with limestone and water) forms a type of concrete (hempcrete) that can be used for home building, at 1/9th the weight. It also acts as insulation and repels some vermin. In 2012, the U.S. hemp industry was valued at an estimated $500 million in annual retail sales and growing for all hemp products; in 2017, that number was $820 million. With the monumental shift in the law, hemp production and consumption is expected to rise into the billions over the next few years.

The latest craze, CBD, or cannabidiol, is a compound extracted from the flowers and buds of a cannabis plants that creates only a very mild or no psychoactive effect for its users. CBD is being heavily studied and is showing great promise as a nutritional and wellness supplement; CBD products are currently being used to treat a plethora of medical conditions and symptoms such as epilepsy, multiple sclerosis, arthritis, inflammation, and chronic pain. Some say it even helps reduce cancerous tumor growths. Today, CBD is commonly used as an additive in lotions, oils, teas, tinctures, and vape products.

The legality of CBD, however, remains murky. Each state differs in its laws surrounding CBD-infused products. CBD can be derived from either cannabis or hemp, with important differences between the two. Cannabis-derived CBD is legal to distribute in those states where marijuana has been legalized recreationally or medicinally. Cannabis-derived CBD can include flowering portions of the plant, and a license is required to cultivate it. On the other hand, hemp-derived CBD is legal in all 50 states can be easily obtained through online websites, at gas stations, and at mall kiosks. Due to the differing levels of THC in marijuana and hemp, hemp-derived CBD contains virtually no THC and will not give you a “high” feeling. Cannabis-derived CBD, on the other hand, contains higher levels of THC, which in conjunction with the CBD, may prove to be a more effective pain reliever.

Specifically, hemp-derived CBD lacks critical medicinal terpenes and secondary cannabinoids found in cannabis oil; these compounds interact with CBD and THC to enhance their medicinal benefits. Additionally, hemp contains far less concentrations of cannabidiol than CBD-rich cannabis strains, so a large amount of hemp is required to extract a small amount of CBD. This raises the risk of contaminants, as hemp is a “bio-accumulator”—meaning that the plant naturally draws toxins from the soil. CBD from hemp is non-toxic, has no psychoactive impact, does not have any known side effects, and may be more appropriate for certain individuals whereas marijuana-derived CBD is not usually recommended for certain people, including pregnant or nursing women and children, because of its potential psychoactive effects.

Keep in mind, cannabis-derived CBD is harder to obtain and illegal to purchase in states with no medical or adult use marijuana programs. In strictly medicinal marijuana states, a doctor must recommend marijuana to a patient in order for marijuana-derived CBD to be legally purchased by a medical marijuana program participant.

Effects and Implications of the New Farm Bill

Removing hemp from the list of Schedule I substances will diminish the legal jeopardy surrounding hemp-derived products and will enable states to become the primary regulators of hemp cultivation. It will also allow researchers to apply for federal grants and make the crop eligible for crop insurance.

Various states are already taking advantage of the new law. California has been cleared by Governor Jerry Brown to begin industrial hemp cultivation in the state starting in 2019. Kentucky has also applied for federal approval of Kentucky’s hemp program immediately after the 2018 Farm Bill was signed into law by President Trump. New York farmers are expected to begin incorporating hemp into their corn and soybean crops to help combat the effects of a recent downturn in the dairy industry.

The Farm Bill empowers state and tribes to regulate the production of hemp without fear of federal intervention. It will permit farmers to grow, process and sell hemp-derived products as an agricultural commodity, which in turn creates economic opportunities and stimulates economic growth in rural communities. This could mean that people will start using hemp to create “bio-based,” “agriculturally- based” products to replace fossil fuel products. BMW has already began using hemp products in some car models’ door panels while other companies use hemp as a replacement for fiberglass insulation.

Overall, the Farm Bill conclusively distinguishes marijuana from hemp, helping hemp escape the stigma that some have attached to marijuana—that it is an illegal, gateway drug. And with this new distinction comes benefits available for those involved in the hemp industry that otherwise remain unavailable for cannabis entrepreneurs whose products are still classified as a Schedule I substance. For example, the Bill would allow hemp farmers to access the national banking system, make hemp-derived products eligible for federal trademark protection, and permit the deduction of ordinary and necessary business expenses for hemp growers on their federal income tax returns, all without precluding access to the federal bankruptcy system if a hemp grower needs such relief.

Of importance, anyone contemplating entering the hemp industry should be cautious of the .3% THC limit specified in the Farm Bill. Hemp protection only exists if the hemp products contain less than .3% of THC, otherwise they are classified as a controlled substance. To prevent this from happening, the hemp industry will need a reliable network of seed producers to prevent those seeds from sprouting into weed through long-term selection and screening for THC. This type of reliable network is precisely the reason why Europe and Canada have been able to successfully grow hemp for several years. The new Bill also presents a new challenge for law enforcement: the hemp plant is identical in appearance to a marijuana plant and may complicate and confuse police investigations. Kentucky has dealt with this problem by requiring hemp-growing participants to register their GPS coordinates and allow hemp inspections by law enforcement.

As we begin this new phase of hemp legalization, consumers and governments have their sights set on additional research that may uncover previously unknown uses and health benefits of hemp and hemp derivatives. Certainly the extraction of hemp from the Controlled Substance Act helps bolster further support for removal of cannabis from the Schedule I substance list. Today, the United States hemp market accounts for roughly $800 million in revenue, but many predict that this will increase to over $20 billion by 2022.

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“Confusing,” “Contradictory,” and “Obscure” Provision of Consumer Contract Claimed to Mandate Arbitration is Held Not to Do So

Kernahan v. Home Warranty Administrator of Florida, Inc., ___ N.J. ___ (2019).  When the Supreme Court grants review based on a particular issue raised by the petitioner, but the petitioner subsequently abandons that issue, the Court has at least three options.  First, the Court can vacate its grant of certification, a path justified by the […]

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Terms Reached in Mediation Are Not Enforceable Without a Signed Agreement

In the recent unpublished (non-precedential) decision of Mathurin v. Matrhurin, the Appellate Division again confirmed that (1) agreements reached in mediation are not binding unless the terms are reduced to a  writing signed by the parties and, ostensibly, their attorneys if present, and (2) absent such a writing, the court cannot consider discussions, unsigned agreements or memoranda from mediation or other settlement negotiations because such writings/discussions are confidential by virtue of the Rules of Evidence that provide privilege to settlement negotiations.  It therefore follows that such confidential writings and/or oral communications cannot be relied upon to convince a court that an agreement was reached in mediation.

The post-divorce litigation in Mathurin arose when Plaintiff/ex-husband filed a motion to enforce the Marital Settlement Agreement (“MSA”) in order to compel Defendant/ex-wife to accept the offer for sale of the marital residence.  The parties agreed to sell the home within the MSA, but after they received this offer, Defendant proposed to buyout Plaintiff’s interest in the home for the same amount.  Plaintiff did not accept this alternative resolution.  Two other enforcement applications followed – one dismissed for procedural issues and the other denied without prejudice (meaning it can be refiled) pending the parties attending mediation because the MSA had a mediation clause that requires the parties to seek such intervention before filing an application with the Court.  The mediation session that followed gave rise to this appeal.

The mediator prepared and signed a Memorandum of Understanding (MOU) listing the terms reached in mediation and further stating the parties’ agreement that the MOU reflects an enforceable settlement reached between the parties.  Plaintiff reneged on the terms in the MOU because of credits sought by Defendant that he found objectionable, and he refused to sign a formal agreement that his attorney prepared incorporating the terms of the MOU.  Plaintiff fired his attorney and filed another motion to enforce the MSA.  Defendant filed a cross application to enforce the MOU to which she attached the MOU and signed certifications from herself and both parties’ counsel wherein those parties disclosed the contents of mediation. Ultimately, the trial court found that it cannot consider the MOU and/or the certifications because they are confidential settlement documents, and that the MOU was not binding.  The Appellate Division affirmed, finding that the MOU and certifications represent confidential settlement material and that the MOU is not binding because it was not signed by the parties or counsel.

The Appellate Division cited to a New Jersey Supreme Court case, Willingboro Mall, Ltd. v. 240/242 Franklin Ave., LLC, 215 N.J. 242, 245 (2013), confirming that the all agreements reached in mediation must be reduced to a signed written agreement and that mediation discussions cannot be relied upon to prove an agreement was reached unless the parties waive the mediation privilege.  The Appellate Division differentiated this case from a 2017 decision, GMAC Mortg., LLC v. Willoughby, 230 N.J. 172 (2017), because in that case the writing was signed by the parties’ attorneys.  Although those cases are not family law matters, the same principals apply to all settlement discussions.

This issue here is one that attorneys and litigants face in mediation all to often – was an agreement reached just because there seemed to have been a meeting of the minds?  The simple answer is no.  Although we do not suggest, nor would we propose, rushing into signing an agreement, if a party in mediation wishes to make sure that the agreement reached in the session is binding, then the terms must be in writing and signed by both parties, as well as counsel if present.  This does not have to be formal – a piece of paper with handwritten terms will suffice – but there is no question that written terms and signatures are required.  At minimum, terms can be memorialized in an MOU but as we all now know, the MOU is not binding.  What may result then is a Harrington hearing, which you can read about in this post: https://njfamilylaw.foxrothschild.com/2014/03/articles/mediation-arbitration/harrington-is-still-alive/

Oftentimes in mediation, the mediator explains at the outset that nothing reached in their session will represent a final agreement unless the terms are reduced to writing and signed by those present (i.e.: parties/parties and counsel).  This is a common instruction, presumably in an effort to avoid a future Harrington situation, and one that I find beneficial so that everyone in the room is starting out on the same proverbial page.

The takeaway – it’s not over until it’s signed, sealed and delivered!

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Lindsay A. Heller is an associate in the firm’s Family Law practice, based in its Morristown, NJ office. You can reach Lindsay at 973.548.3318 or lheller@foxrothschild.com.

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The Supreme Court Answers Certified Questions About the Ticket Resale Law

Finkleman v. National Football League, ___ N.J. ___ (2019).  This opinion by Justice Patterson today answers certified questions posed by the Third Circuit Court of Appeals arising out of a putative consumer class action.   The questions involve N.J.S.A. 56:8-35.1 of the Ticket Resale Law, which was in force in 2014 but was repealed in 2018, […]

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Drug Court and Expungements

In re Expungement of Arrest-Charge Records of T.B., ___ N.J. ___ (2019).  Today, the Supreme Court issued its first opinion of 2019, a unanimous ruling by Chief Justice Rabner.  The matter involved three consolidated cases.  The defendants in those cases pled guilty to third-degree offenses, went into the Drug Court program, and successfully graduated from […]

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Reconsideration Motion Was Not Timely “Served,” and Court Thus Had No Subject Matter Jurisdiction Over It

Murray v. Comcast Corp., ___ N.J. Super. ___ (App. Div. 2019).  In this employment case, the issue was whether the Law Division had subject matter jurisdiction to entertain a motion for reconsideration.  On June 9, 2017, the Law Division granted defendants’ motion to compel arbitration of plaintiff’s claims.  Plaintiff mailed in a motion for reconsideration […]

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