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Use of ADR Methods to Resolve Cannabis-Related Disputes

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Alternative dispute resolution methods such as mediation or arbitration have been used for the resolution of disagreements among contract parties to a contract. These methods help parties to reach a resolution to their dispute in a shorter time than the traditional claim in court. With closure of courts in response to the coronavirus pandemic, ADR methods have proven to improve the efficiency with which business disputes are resolved.

The cannabis business has also grown exponentially in the last few years with a $2.1 billion growth predicted for 2020. A growth in the business also brings a growth in cannabis-related litigation. The American Arbitration Association has also shown a 225% increase in the amount of cannabis-related cases the organization arbitrated during 2019.  Even when the cannabis industry is considered an essential business for purposes of the lockdown orders issued by the State of California, court closures can further delay dispute resolutions, negatively impacting the functioning of businesses. Therefore, the use of ADR methods can prove helpful in keeping the business running.

Where could disputes arise?

The areas where disputes can arise in the cannabis business are generally those where other industries also see disputes arise. Some examples of these areas are:

  • Intellectual property
  • Commercial disputes with suppliers or customers
  • Real property
  • Employment
  • Licensing
  • Financing disputes
  • Disputes related to the ownership of the business

Types of ADR

The two most popular ADR methods are mediation and arbitration.

  1. Mediation: By using this method, the parties to a dispute agree to discuss the issues of the disagreement and to reach an agreement without the need to formal litigation or having a court get involved in any manner. Parties can agree to resolve their dispute in this manner at any point, even when a claim has been already filed. However, the resolution reached by a mediator is not enforceable and will require the good faith of the payor for the final resolution of the dispute and payment or compliance of any amount due or outstanding obligation.
  2. Arbitration: To take advantage of this method, parties must have included an arbitration clause in their contracts. Arbitration is the method through which an arbitrator (usually an experienced lawyer) looks at the facts of the case and decides the case and the parties agree in advance that the decision of the arbitrator will be enforceable. Arbitration could be expensive as the parties will have to cover the fees charged by the arbitrator of their choice. However, this method streamlines the resolution process avoiding unpredictable delays that could come up in court.

Our team can assist you in exploring alternative resolution or litigation for the resolution of your cannabis business disputes. Reach out to the skilled Los Angeles cannabis litigation attorneys at Obagi Law Group, P.C. for help.

Resources:

forbes.com/sites/forbestreptalks/2020/01/26/cannabis-industry-2020-predictions/#1f796c343f31

natlawreview.com/article/using-adr-cannabis-disputes

bcc.ca.gov/about_us/documents/media_20200321.pdf

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