Be Prepared What to do when the regulators come knocking

In Colorado, there are currently over 135 state rules governing retail cannabis businesses. These regulations are in addition to separate statutory requirements and are often complementary to a host of local regulations. While not all regulations are applicable to all businesses, there is a chance that even the most compliant business may be violating a handful of rules, sometimes without knowing. What happens, then, when a regulator wants to take disciplinary action against your license for an alleged rule violation?

The most important thing to remember is that anyone whose license is in jeopardy is entitled to due process. Make sure you develop a plan of action, and follow through with every step.

“While plans can, and often should, change, you are usually best advised to take a disciplinary matter seriously and to keep the matter moving as much as possible. Make a plan and stick to it.”

The administrative disciplinary process is unique, and if you seek legal counsel to help you navigate the disciplinary process, you are better off enlisting the services of a practitioner who understands the nuances of regulatory law. Considering that a regulator can often take everything from you, and that your license is a revocable privilege, you may be better off with an attorney who does not have an emotional attachment to the situation.

Further, licensees are often sorely disappointed to learn that standard plea negotiations are inapplicable, the regulators’ attorneys do not have unilateral authority to settle a matter, and at an administrative hearing, the government only needs to establish “it is more likely than not” that a violation occurred. Many are also unpleasantly surprised (and confused) to learn that the officer presiding over the hearing is often an employee of the ultimate decision-maker, and the entity who subjects you to initial discipline is also the entity who hears your appeal.

If you are served with any type of disciplinary document from a governmental agency, it is usually not a good idea to sit back and wait. Many licensees have experienced slow deaths while “waiting and seeing” what happens next for months. Do not mistakenly believe that the regulators are looking out for your best interests, that your thoughtful settlement offer is being seriously considered for months, or that the agency wants to avoid taking your matter to hearing as much as you might.

While plans can, and often should, change, you are usually best advised to take a disciplinary matter seriously and to keep the matter moving as much as possible. Make a plan and stick to it. If nothing else, if you are unable to settle a matter and end up going to a hearing, you do not want your evidence to go stale because of your delay. So, in addition, be proactive. Fight for your license. While you and your attorney should of course always be professional, you do not need to worry about offending an agency or its attorneys by asking questions and requiring the agency to prove its case. If an agency says you violated Rule X, read Rule X. If you do not believe you violated the rule, say so. Look at the statement of basis and purpose for Rule X and see what the intent of the rule is. Did your alleged violation align with the rule’s intent? If not, argue that. Look to the statutory provisions that formed the basis for Rule X and see if you can improve your case. Look to the procedural rules governing disciplinary matters, if such rules exist, and ensure the agency follows them.

While waiting for the agency to change its mind on its own is very unlikely, it is also equally unlikely that an agency will just want to give up and settle on your terms. What is more likely is that a licensee will want to fight, but will not know how. After months of zero-to-little movement, licensees frequently will cave and settle on unfavorable terms. With that in mind, you should remember to be proactive and attentive. Learn your rights and ensure that the agency adheres to them. Do not be a victim of the slow death by discipline.

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