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Dear Pot Lawyer,

The government told me that my cannabis business was fine. Now they are telling me the opposite. What can I do?

This can be a nightmare scenario for many cannabis businesses. Getting your state and local licenses sometimes feels like navigating a maze—a maze of different agencies and municipal departments, involving a variety of state regulations and local zoning ordinances. What happens if you’ve invested thousands in your business based on a statement of a government employee, only to later find that the approval was granted in error and rescinded?

Of course, the first thing to do is throw yourself on the mercy of the government entity and ask for the decision to be reversed. But let’s assume this doesn’t work. Once you have exhausted these options, you will be left with going to court to either demand the government change its mind, or ask to recover your damages.

Courts variously refer to these types of claims as “estoppel” or “detrimental reliance.” There are some nuanced differences between the two, but generally, you must establish that the other party made a false representation with knowledge of its falsity and with the intention that you would rely on that representation. On your part, you must have actually relied on that representation without knowledge that the representation is false. There is some case law suggesting you should have knowledge of publicly available laws. So it isn’t reasonable for you to have relied on a statement from a government employee that conflicts with clear law.

These kinds of claims are further limited when the defendant is a government entity. Courts have looked at a variety of additional factors when deciding whether a government entity can be bound by promises of its employees: whether the employee has actual authority to make a final decision; whether the employee appears to the public as having that authority; whether the employee has reason to believe they can make that final promise; whether there are laws on the books putting the employee’s acts beyond its authority; and whether the government entity received a benefit in exchange for the promise.

Older cases have also drawn a distinction based on whether the claimant could have received a benefit were it not for the false representation. For example, your estoppel claim might prevail if a government entity misrepresented a filing deadline and then denied you benefits you would have been eligible for if you hadn’t missed the deadline. However, a statement that you are eligible for a benefit when you actually aren’t is usually not actionable. I suspect the vast majority of reliance issues in the cannabis realm are the latter, where an entity has represented that a property is compliant for licensing, but turns out not to be. The cannabis business is unlikely to prevail in that circumstance, particularly where it involves mandatory and publicly available rules, such as the Oregon cannabis statutes.


Got a question? Email us at potlawyer@portlandmercury.com. And remember that if you have a legal problem, contact a lawyer! Our educational musings cannot be relied upon as specific legal advice.