Early last week, we covered Governor Brown’s Executive Order No. 19-09 banning flavored vaping products. That ban is six months in duration, and it covers all flavored tobacco and nicotine vaping products, as well as marijuana products flavored with non-marijuana terpenes. As expected, the Oregon Liquor Control Commission (OLCC) and Oregon Health Authority (OHA) quickly released temporary rules enacting the ban, both inside and outside the marijuana context. No one in the OLCC world challenged this ban, which is surprising given the significant industry impact.
Outside of the marijuana context, it’s a different story. Yesterday afternoon, the Oregon Court of Appeals granted a request for an immediate and temporary stay from enforcement of the new OHA rules found at OAR 333-015-1000. These rules prohibit retailers from “offer[ing] for sale a vapor product containing a flavor, to a consumer in Oregon.” The Petitioners here are a series of vape businesses and interest holders, which filed two separate lawsuits. The first lawsuit was filed by a national trade group known as Vapor Technology Association along with southern Oregon outfits Vape Crusaders Premium E-Liquid, LLC and Smokeless Solutions, LLC. The second lawsuit was filed by a Portland shop called Division Vapor and its owner, Paul Bates.
Interestingly, the “Division Vapor” name registration has long since expired and ORS 648.135(1) may prevent that company from moving any further. They have slipped through for now, though, and along with other Petitioners, Division Vapor argued that “as a result of the [emergency OHA] rule, they, along with numerous other similarly situated businesses, will be forced to permanently close within weeks.” That was enough for the Court, which halted the rule and gave all Petitioners the opportunity to duke it out with the Oregon Department of Justice in motion practice. Eventually, the court will reach a decision on the merits. This is a similar outcome to what recently happened with the ban in New York State. Challengers in Massachusetts have been less successful.
Will the Oregon vape shops ultimately prevail? It’s hard to say, and a full analysis is beyond the scope of this post. Could OLCC licensees have made identical arguments to the Appellate Commissioner to buy some time? Absolutely. Could they still? You bet. Overall, however, industry response has been staid, including from the Oregon Cannabis Association and other trade groups. And though our office has heard client complaints about business interruption–including talk of losses and layoffs–no one has stepped up to challenge the temporary rules at OAR 845-025-2805. That may change if someone is emboldened by yesterday’s ruling.
The big question in any marijuana business challenge would be whether the Appellate Commissioner and ultimately the Court would think of that challenge in the same manner as the vape shops. The two sets of petitioners are not perfectly analogous, of course, and the Court could determine that vape shops are more dependent on sales of newly banned products than affected OLCC businesses. Still, given various factors including: 1) the highly competitive nature of the OLCC market, 2) the razor-thin margins of many licensees, and 3) the flavor-dominant product lines of many processors, a compelling argument could be made that the emergency rules will have a fatal effect on one or more businesses. In light of yesterday’s ruling, it might be worth a shot.