California cannabis businesses face costly peril with marketing robocalls, attorney says

Robocalls are not only a nuisance. They can be costly for the cannabis industry.

That’s the assessment an attorney made during the North Coast Cannabis Industry Conference on Wednesday during a discussion about the legal ramifications of the Telephone Consumer Protection Act.

“Everybody hates getting unsolicited phone calls,” Farella Braun + Martel attorney Cynthia Castillo told attendees of the Business Journal’s virtual conference, which was underwritten by her San Francisco-based law firm.

The TCPA requires companies making calls and texts to cellular telephones using auto-dialing features to obtain written consent from the receiver.

Fines for non-compliance can range from $500 to $1,500 per call. Castillo noted one Oregon case in which the plaintiffs were awarded $925 million in damages from a company that allegedly made 1.8 million calls.

The cannabis industry is especially vulnerable to these class-action lawsuits because it’s relatively new and the businesses “may not know all the rules,” Castillo said.

“(The plaintiffs) are able to exploit these weaknesses,” she said.

It doesn’t help matters for the industry that the law is interpreted in various ways depending on the court and interpretation of what constitutes autodialing — whether random or sequential.

The hope is the lower courts will hear cases that will interpret the high court’s ruling over the next few years.

“The next few years we’ll start to see clarity,” she said.

In the meantime, Castillo added the industry will need to negotiate “a patchwork of rules.” To avoid getting slapped with a class-action lawsuit and opening themselves up to millions in damages, she advises businesses to do the following:

  • Work with an experienced attorney
  • Continue to get written consent and allow for an opt-out of promotional texts
  • Standardize a company policy
  • Keep adequate records
  • Ensure vendors are compliant

“Right now, the safest course of action is getting expressed consent,” she told attendees.

Cannabis and social consciousness make legal bedfellows

The cannabis industry has experienced a rocky road through the years as a target for the federal government in particular. There was more strife as far back as the Nixon Administration when the feds cracked down with tougher laws.

Nonetheless, as Judith Schvimmer points out, dealers are still not out of the woods in terms of avoiding jail time.

Minorities such as Blacks and Hispanics are particularly targeted, making up half the inmate population — a social injustice the attorney believes needs fixing. Schvimmer, with a 15-year track record in regulated industries such as Jackson Family Wines and Lagunitas Brewing Company, now serves as legal counsel to The Parent Company.

“These racial disparities are found in all phases of our criminal justice system,” she said.

Another cannabis conference presenter, Morgan Fox of the National Cannabis Industry Association, noted the industry has made major headway. It has first by seeing the number of states decriminalizing cannabis grow and in another by seeing the near passage of the SAFE Banking Act.

The U.S. House of Representatives passed the bill for the third time in this session, an action seen as “an overwhelming victory,” Fox told attendees.

The U.S. Senate is quite another matter. It has blocked several efforts to remove obstacles to provide safe harbor for banks to do business with cannabis operations.

But Fox said U.S. Sen. Chuck Schumer, D-New York, the majority leader, has pledged to push through legislation that will decriminalize the drug. Democrats have made that attempt with the MORE Act, which is proposed legislation that would decriminalize cannabis in the United States. It stalled in the Senate.

But to pass such a far-reaching law, Fox views the filibuster rule in the U.S. Senate as an obstacle. A filibuster is a parliamentary procedure that allows a minority party, as is the case currently for the Republican Party, to stall proposed legislation by tying it up on the Senate floor.

Still, Fox shared his optimism that it’s a new day and age for Republicans weaning into their embrace of cannabis — especially when considering Virginia as the first southern state to legalize cannabis.

“It’s pretty groundbreaking,” he said.

As for President Joe Biden: “It would be hard to picture a world in which Biden would oppose legislation to de-schedule it (if a bill is introduced). It’s going to be driven by Congress,” he said, referring to the legislative effort to remove cannabis from the list of illegal drugs.

Follow the money

Talking about the growth in the industry’s reach, Headset Inc. CEO and co-founder Cy Scott, said the Seattle-based company projects U.S. cannabis sales to top $22.7 billion by the end of 2021 and climb another $6 billion next year.

Much of the “strong growth” centers on California, which experiences 30% year-over-year increases and takes in about a quarter of cannabis sales rung up in the United States, he added.

“California is the prize,” he said.

To illustrate the Golden State’s domination, he listed New York, New Jersey, Connecticut and Pennsylvania as collectively serving as the West Coast state’s rival.

The demographics are also a-changin’. Millennials are beating the beatnik baby boomers by 39% in the market pie, with over half the consumers falling into that age group defined as those between 25 and 40 years old. Gen Zers’ 12% market share as “a standout demographic” aligns with baby boomers, while Gen Xers make up 22% of the buyers.

“Millennials are still the dominant drivers. But to target the Gen Zers would be wise,” Scott said, referring to the generation’s potential.

The market is flourishing, with flowers “the predominant category,” which remains a “stable” force, Scott’s market intelligence firm has discovered. The market involving vape pens and cartridges represents much potential for sales among 800 active brands.

According to Headset data, the top 10 brands take in a quarter of U.S. cannabis sales — but all that could change in the coming years.

“The book hasn’t been written on that yet. That’s what makes this industry so exciting,” he said.

Editor’s Note: This story is updated to clarify the remarks of National Cannabis Association Media Relations Director Morgan Fox about the filibuster in the Senate. Fox said he was implying cannabis advocates need to "beat" the filibuster by working around it as an obstacle in the U.S. Senate. The association has no official position on the filibuster.

Susan Wood covers law, cannabis, production, energy, transportation, agriculture as well as banking and finance. For 25 years, Susan has worked for a variety of publications including the North County Times, now a part of the Union Tribune in San Diego County, along with the Tahoe Daily Tribune and Lake Tahoe News. She graduated from Fullerton College. Reach her at 530-545-8662 or

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