The Worst Time To Sell A Privately Held Business

“When is the best time for me to sell my company?’ – a question we have heard time and time again from business owners. “says Achim Neumann, President, A Neumann & Associates LLC, a New Jersey based Mergers & Acquisitions advisory and Business Brokerage firm, “And the question becomes even more important in the current economic cycle.”

After many years of excellent growth, business owners start questioning, if an economy supported by a favorable tax environment, low interest rates and significant available equity funding will continue to support growth in their companies, plus provide a good environment to sell their business in the near future – all of this with the background that most economic indicators continue to predict growth, albeit at a lower rate, with seemingly little support for an imminent recession.s

Furthermore, with many business owners approaching retirement within the demographic “baby boomer” shift, they are asking themselves this question more so with respect to lifestyle decisions than to financial concerns.

Setting aside lifestyle considerations for a minute, selling a company always starts with a proper initial company business valuation regardless of the economic cycle.   As we have seen so often on the television program, Shark Tank, a correctly valued investment opportunity will attract buyers, an overpriced proposition will result in little interest.

Such business valuations, conducted by accredited, national business valuation firms, usually view a seven-year financial period for formulating a value – three years of projections, the current year-to-date with comparison to the previous year and the past three years. Historic financial data is based on tax returns adjusted for discretionary owner expenses and one-time events in order to derive the true cash flow generating capabilities of the company. Said financial review is typically supported by a review of a company’s operation and market position.

Challenges come into play when there is little consistency in this seven-year review period, as investors always prefer to see stable environments and consistent trends.  Most often, there is the ’hockey stick’ scenario: a declining past trend of sales or EBITDA (Earnings before interest, taxes, depreciation, and amortization), is all of the sudden met with vastly optimistic projections for the future of the business’ performance.

How does the micro-economic effect of poor forecasting or the macro economic impact of the economy as a whole impact the opportunities to sell a company?

Focusing on the macro economic impact and the right timing of selling a company, let us assume a company has had consistent growth in the past five years in top and bottom line. Furthermore, assuming a 2019 economic decline, the company’s sales are predicted to decline by 15% to 25%.

For a contemplated valuation to be performed in 2019, such sales / EBITDA decline would land within in the previously mentioned valuation review period. The financials would show continued growth from 2016 to 2018, a decline in 2019, and reduced forecasts for 2020 to 2022. Thus, investors would immediately attempt to shift any perceived future risks to sellers, for example, in the form of a large earn-out for future performance.  In other words, such ‘dip’ has an immediate impact on buyer expectations for the future.

As we have seen quite often in the 2008 recession, some business owners might suggest to wait a year or two hoping for a rebound.

However, within the previously stated seven-year valuation review period, even if a business would only show a ‘dip’ in 2019 with continued growth there after, the historic cash flow 2018 to 2020 would still be ‘visible’ as a trend line in a 2021 valuation and thus, the business would not be ready for a business valuation before 2022 without showing any inconsistent trends.

Consequently, from a pure business valuation point of view, “waiting just one more year” truly translates into waiting three more years and, adding an additional year to actually sell a business, the business owner’s retirement plans were really delayed by 4 years – for a transaction in the spring of 2023. Needless to say, the underlying significant assumptions that there is no prolonged recession, the company will continue to perform without further ‘dips’ and there will be no health issues by ownership are strong assumptions, indeed!

In sum, any business owner contemplating a business sale at any time within the next three years, should not wait too long but rather take advantage of the current economic climate. A potential economic decline can quickly translate into a five-year delay for obtaining maximum value.

A Glimpse Into the Immigration Crystal Ball

Anyone who has dealt with the Immigration Service or ICE over the past 2 years would agree that we are living in a fairly contentious pro-enforcement immigration environment.

In looking forward to 2019, our crystal ball tells us to expect more of the same.

The trend of deliberately voluminous and combative Requests for Evidence from USCIS is expected to continue along with a surge in worksite compliance enforcement (I-9 audits) from ICE and the reversal of rules that were once beneficial to certain foreign nationals.

H-1B and L-1 Adjudications

On April 18, 2017 an Executive Order, “Buy American Hire American” (“BAHA”) was signed, and set off a chain reaction that resulted in a palpable difference in the adjudications process of H-1B and L-1 visas.

According to the National Foundation of American Policy,[1] by the fourth quarter of Fiscal Year 2017 (“FY 2017”), almost 70% of H-1B applications filed received Requests for Evidence (RFEs).  In fact the number of RFEs received in the fourth quarter of FY2017 alone almost equaled the number of RFEs for the first three quarters combined, with 63,184 RFEs issued  in the fourth quarter alone compared to 63,599 in the first, second and third quarters combined. This drastic increase began in July 2017, less than three months after the signing of BAHA.

Within the increase of RFEs, there is an evident national origin disparity.  Applications filed on behalf of Indian nationals received RFEs at a higher rate than those of any other country.  We believe this disparity is related to higher scrutiny of applications in the Information Technology industry.  In the fourth quarter of FY2017, 72% of H-1Bs filed on behalf of Indian nationals received RFEs as compared to 61% from all other countries.  More significantly, the denial rate of H-1Bs for Indian nationals rose 42% from the third to fourth quarter of FY 2017 alone, with 16% of H-1B petitions denied in the third quarter and 23.6% of H1B petitions denied in the fourth quarter.[2]

The same trend has been seen in the adjudication of L-1 petitions filed with the USCIS Service Centers in the United States. Denials of L-1B petitions rose from 21.7% to 28.7% in FY 2017, representing a 33% increase, with almost half of petitions filed on behalf of Indian nationals being denied in the final quarter of FY 2017. While the statistics for the full fiscal year of 2018 have not yet been released, it is reported that the denial rate for L-1B petitions in the first quarter of FY 2018 was 30.5%, and 29.2% in the second quarter of FY 2018.  The rate of denial for L-1A petitions increased by 67%, from 12.8% to 21.4% in FY 2017.[3]

While the rate of RFEs for L-1 petitions remained fairly consistent, the occurrence of RFEs continued to be inflated.

Aside from BAHA, another driving force behind the increase in RFEs and denials is the loss of the long-standing practice of deference to prior adjudications.  On October 23, 2017, that practice was officially rescinded by USCIS wreaking havoc on the adjudications of extensions and amendments of previously approved H-1B and L-1 petitions.

We expect to see similar trends in the year 2019, perhaps not with the same level of increase, but do not necessarily expect these numbers to climb any higher.

ICE Worksite Enforcement Spike

The year 2018 saw a significant increase in compliance enforcement with regard to I-9 regulations and employment-based record keeping.

ICE instituted a two-phase enforcement effort in the year 2018. The first phase was conducted from January 29th through March 30th 2018 and resulted in 2,540 Notices of Inspection (the Notice of Inspection, or “NOI” is the notification given to employers that an I-9 audit is being conducted), and 61 arrests.  In July, the second phase began and resulted in 2,738 NOIs being issued, resulting in 32 arrests.[4]

In its totals for FY 2018, ICE reported that a staggering 6,848 worksite investigations were opened by Homeland Security Investigations (“HSI”) in FY 2018, as compared to 1,691 in FY 2017. Similarly, HSI opened 5,981 I-9 audits in FY 2018, as compared to 1,360 in FY 2017; a 400% increase.

Further, FY 2018 saw HSI make 675 criminal arrests and 984 administrative worksite-related arrests, as opposed to FY 2017 in which ICE made 139 criminal arrests and 172 administrative arrests. This is an increase of more than 500% year over year.

Continued targets for I-9 audits will likely include factories/manufacturing companies, food packaging companies, restaurants, construction companies and staffing companies. However, we also expect that in the coming year, random audits will rise and thus the types of companies subjected to I-9 audits will not be limited to those industries listed above.

Once ICE comes knocking on the door, and issues a NOI, a business has 3 business days to produce payroll records and all I-9s.  Thus, the best protection for any employer is to maintain and conduct internal audits of I-9 records before a NOI is issued.  A company that completes internal audits and I-9 training prior to an audit has the added defense of “good faith” compliance which is a powerful bargaining tool in order to negotiate fines and reduce them significantly if ICE ever does come knocking on the door.

Rescission of Employment Authorization for certain H-4 visa holders

Many Executive Orders signed by the prior administration have been negated in the past 2 years, and one of the next on the proverbial chopping block may be the current eligibility for certain H-4 non-immigrant visa holders to obtain work authorization in the United States.

The current rule, in place since 2015, allows H-4 dependent visa holders to obtain work authorization if an immigration petition (I-140) has been approved for the H-4’s spouse, and there is a quota backlog which does not otherwise allow for the final stage of the green card application to be filed.

The proposed rule (RIN 1514-AC15) to rescind this grant of work authorization was initially expected to be published in February 2018 but was delayed.[5] At this point we continue to wait for the proposed rule to be sent to the Office of Management and Budget (OMB) to be reviewed as a Notice of Proposed Rule Making. There is reason to believe that this proposed rule will become a final rule in the year 2019 in keeping with the spirit of BAHA. However, the current federal government shutdown is preventing this process from moving forward at the moment, so there is at least some hope that this rule may survive the year.

The Supreme Court may have good news in store this year-  Kisor v. Wilkie

Because there is always a silver lining, the U.S. Supreme Court will hear arguments this year in a new matter, Kisor v. Wilkie.  Kisor is a challenge to two key precedents (Auer v. Robbins and Bowles v. Seminole Rock& Sand Co) which give agencies automatic deference in their reading and interpretation of their own regulations. USCIS often cites Auer in decisions where it applies heightened standards for reviewing the “employer-employee” relationship or creates new evidentiary standards for demonstrating that a position qualifies as a specialty occupation.

If the court were to reverse the ruling in Auer v. Robbins (one of the decisions it is reviewing in Kisor), this will remove USCIS’s ability to consistently change its interpretation of regulations that have been on the books for decades, essentially moving the goal post every time practitioners adjust to the new standards being imposed by USCIS.  This could, in effect, force the agency to settle on more reasonable definitions and standards of review.

It should be noted that if the Kisor ruling does overturn Auer, this will not mean that deference will be completely removed from federal agencies, but instead, the Skidmore standard of deference would control. The Skidmore standard allows a federal agencies’ interpretation of its own regulation to be “weighed” based on its ability to persuade, but does not allow for absolute deference, which is what federal agencies currently enjoy. Thus, with this new case, the stage is set for the U.S. Supreme Court to force USCIS to live reasonably within the four corners of the regulations which would negate the existence of many of the RFEs it issues now.

The reason for our collective optimism in the Supreme Court agreeing to hear arguments in Kisor exists in the unlikely prospect that that the Supreme Court has agreed to hear this particular case for the purpose of affirming longstanding precedent.  In fact, we know that in their time on the Circuit Courts, both Justices Gorsuch and Kavanaugh have expressed support for reigning in the level of deference afforded to federal agencies and have sought to limit the unbridled power of federal agency interpretation. So our prediction is that in the year 2019, we may very well see the USCIS served with some accountability and oversight if it goes too far adrift of its own regulatory standards.


Given BAHA and its trickle-down effect on U.S. immigration policy, anyone seeking to file an application for an immigration benefit in the year 2019 should approach the process with careful optimism.  In the year 2019 the practice of immigration law will continue to present a challenging environment but with the proper professional assistance, any employer can navigate the labyrinth of regulations and policies to achieve success in the process. We remain optimistic – so should you.

[1] The National Foundation for American Policy is a 501(c)(3), non-profit, non-partisan research organization focused on immigration, international trade and other global issues. NFAP’s research has been cited on over 100 occasions in authoritative sources such as the Wall Street Journal, New York Times and Washington Post.  See


[3] Id.



CIANJ’s New Board Members are Top New Jersey Business Leaders


THIS MONTH’S cover story salutes today’s heroes—first responders, veterans, diversity champions and sports stars, showcasing George Martin, co-captain of the 1986 Super Bowl Champion New York Giants; Medal of Honor recipient Col. Jack Jacobs; the late General Norman H. Schwarzkopf, Commander-in-Chief of U.S. Central Command during Operation Desert Shield/Storm (the first Gulf War); and New Jersey police and firefighters.

In honor of February being Black History Month, we also feature the Honorable Condoleezza Rice, former Secretary of State; Martin Luther King III, son of civil rights leader Martin Luther King Jr.; former New York Giants All-Pro defensive end Justin Tuck; and baseball legend Hank Aaron.

Just as these heroes play a vital role in leading the way forward, CIANJ’s leadership role as the voice of the New Jersey business community is also important. Vital in this regard are the executives on our board of directors, and the following new CIANJ board members were elected at the 2018 Annual Luncheon:

John J. Anderson, vice president for external affairs for Jersey Central Power & Light, leads a team that liaisons with municipal governments; key commercial and industrial customers; and civic organizations. His team also provides support for community involvement activities.

Dale A. Creamer; as executive vice president of J. Fletcher Creamer & Son, Inc., he establishes policies and processes; oversees all equipment purchases and maintenance; reviews all field operations; and reviews bids. He started with the firm in 1986, and currently serves on the board of Holy Name Medical Center

Christine M. Cormier, regional sales director of United Airlines, manages a team of sales professionals who are tasked with acquiring new business and retaining business from a portfolio of accounts. She is United’s primary representative for corporate, agency and civic activities within the New York region.

Richard J. Helldobler is the eighth president of William Paterson University in Wayne, New Jersey, one of the state’s largest public universities with more than 10,000 students. He assumed the presidency on July 1, 2018. He has 30 years of higher education experience.

Thomas J. Herten, Esq., shareholder, executive vice president and director at the Archer law firm, concentrates his practice on complex commercial litigation, Chancery Practice, land use and transactional law—including commercial and residential real estate

Jason Kroll, vice president and chief strategy officer for New Jersey City University, works with the president and the board of trustees to identify, develop, lead and manage strategic initiatives. He oversees Athletics, Auxiliary Services, Development & Alumni Affairs, the Center for the Arts, Government & Community Relations and Marketing & Communications.

John Manna joined PNC Wealth Management in 2013 as senior vice president and wealth director for the Millburn, New Jersey Team. In 2017, he was promoted to wealth managing director for the NJ/NY market.

Randy Minniear, executive vice President of external affairs for CarePoint Health, has direct oversight of all governmental, community relation and communications operations, in addition to his role on the executive team, which maintains authority over all company operations.

Peter Webster, resident managing director of Aon NJ, oversees the Risk, Health & Benefits and Marketing divisions of Aon’s Morristown and Somerset offices. He is responsible for leveraging Risk, Health & Benefits, Aon Hewitt, Univers and Benfield as an Aon One Voice total solution, driving growth and talent engagement for both internal and external clients.

CIANJ Board of Directors Member Dax Strohmeyer, president of Triangle Manufacturing Company, was appointed to serve as an At Large Member on CIANJ’s Executive Committee. He was a board member prior to this promotion.

Leadership matters, and we are grateful to have these business leaders as members of our board or directors.

When the Smoke Clears, Cannabis Will Be the Garden State’s New Cash Crop

IN NEW JERSEY, WHILE CANNABIS will soon be a growing industry, it will be complicated because the drug is still classified as a Schedule I controlled substance. This makes bank financing difficult to find, and expen-sive as well. Local ordinances banning cannabis facilities add an additional roadblock when it comes to locating real estate for these businesses. As sage legal counsel is essential when assessing the challenges and opportunities for this new industry, COMMERCE asked many of the state’s top law firms to weigh in on the prospects for cannabis-related companies in the Garden State.

Archer By William J. Caruso, Esq., Of Counsel, Cannabis Practice

The recent and rapid changes to cannabis law here in New Jersey, nationally and internationally have affected almost every practice area in the firm. Archer has seen steady increases in work in obvious areas such as corporate transactions, land use and real estate. However, practice areas relating to family and labor law have also been impacted by these changes. The ever-shifting legal landscape and conflict between state and federal laws provide complexities and a lack of clear direction for businesses that are seeking to enter into the cannabis industry, as well as traditional companies that are not involved in cannabis. However, this challenge provides a unique opportunity to develop good policy from the ground up. Archer lawyers have been working to craft new cannabis policy in Trenton through both regulatory and statutory changes to arm businesses with the certainty they need to function effectively in this new, exciting market.

Brach Eichler LLC By Charles X. Gormally, Esq., Co-Chair, Cannabis Law Practice

When counseling clients interested in the cannabis space, we emphasize the importance of forming relationships with reliable support team members. A successful cannabis business participant must create strong professional relationships across a broad range of specialties—accounting, taxation, real estate, land use, banking, environmental law, administrative law, municipal government, food handling, packaging, horticulture, medical research, security—and have access to the expertise necessary to produce and process cannabis products. The Cannabis Practice Group works as a team to equip the client with a broad range of required legal services, while assisting the client in formalizing its professional relationships with partners, vendors and suppliers. The overarching goal of the Group is to position clients for success by assuring that the client will be compliant with all of the requirements of state law, while keeping the client cognizant that conducting a business in this area currently remains a violation of federal law.

Capehart Scatchard By Sheila M. Mints, Esq., Cannabis Group Leader

Since the business is still in its infancy in New Jersey, and the regulatory structure has not yet been developed, there are a lot of uncertainties. We attempt to help the clients understand that this is a real business that requires significant upfront investment not only of money, but of time and expertise. There are stringent policies which must be followed—in cultivation, manufacture of edibles and dispensing of medical marijuana. There are issues of local government approvals, land use and zoning requirements for the location of facilities. Especially with cultivation, there will be a significant time lag between obtaining a license (if indeed a license is awarded) and harvesting. Our strong recommendation to clients is that they prepare early if they want to apply in the next round of licenses and have their team of consultants and experts prepared so that they are ready for the pending application process.

Chiesa Shahinian & Giantomasi PC By Lee Vartan, Esq., Member, Chair, Cannabis Law Group

The biggest universal challenge for clients (and the firm) is preparing for all-but-certain legalization in a form that is still very uncertain. There are competing bills in the New Jersey Legislature, and no one knows whether oversight will ultimately be housed in an independent commission or somewhere else, what the tax rate will be, or innumerable other details. But what we do know is that, regardless of the final form of any bill, the state licensing body is going to be focused on applicant diversity, as well as evidence of support from the local community and a location that is appropriately zoned. At CSG, we have been working with clients to shore up those pieces now, so that when the legislation is passed, and an application period is open, our clients can move without delay. Our advice is simple: legalization is coming, and the time to prepare is now.

Cole Schotz P.C. By Robert M. Dipisa, Esq., Member, Cannabis Law Group

With New Jersey’s impending adult-use market, our Cannabis Law Group is seeing expediential growth in the number of pre-license plant-touching clients. We’re currently assisting clients with identifying shortfalls within applications, raising capital, obtaining municipal support and securing real property. There are substantial opportunities within the non-plant touching, ancillary side of the business. We are preparing clients to transition their existing products and services in non-cannabis industries to address one of the many facets within the nuanced cannabis industry. The ability of these clients to sell products and services across state lines, and avoid exposure to various regulatory compliance obstacles, puts them in a unique position to capitalize on the industry. The most significant challenges stem from cannabis’s federal status. Of particular concern are issues associated with insuring and financing the acquisition of real property—insuring against casualties, the acceleration of existing financing and non-cash payment methods, to mention a few.

Connell Foley LLP By George Garcia, Esq., Partner, Cannabis Law Group

Connell Foley’s Cannabis Law Group consults on a wide range of issues regarding medicinal and adult-use cannabis matters in New Jersey. We assist clients with business and legal matters related to cannabis business formation, licensing, real estate acquisitions and land use approvals. The Cannabis Law Group also advises clients on pending legislation, business plan development, regulatory matters, distribution agreements, and labor and employment matters pertaining to cannabis entities. Given the complexity of this new industry, businesses are often misguided by the recent amendments to existing cannabis law. In 2018, the New Jersey Legislature continued to amend the existing medicinal legislation and the proposed adult-use legislation; further amendments are likely forthcoming in 2019. Using cost-effective methods, Connell Foley continues to thoroughly analyze these recent amendments to effectively counsel clients on the potential financial and legal impacts the legislation may have on cannabis-related entities.

Dunn Lambert, LLC By Peter E. Lembesis, Esq., Cannabis Practice Leader

New Jersey’s burgeoning cannabis industry presents an exciting opportunity for entrepreneurs. The anticipated legalization of recreational cannabis should benefit the state by generating tax revenue and creating jobs, including in ancillary service businesses (i.e., information technology and security). However, due to societal misconceptions and current federal law, cannabis businesses still face many political, logistical and regulatory challenges. Our firm has been helping clients surmount these challenges by bringing to bear its substantial experience in numerous fields. We regularly assist companies in navigating various evolving compliance frameworks and have deep experience in corporate and financing work, tax, real estate, intellectual property, commercial litigation and employment law. In addition to utilizing this significant experience to effectively advise cannabis clients in several sectors, we have been closely monitoring legislative developments to insure our clients are ready to hit the ground running once recreational cannabis is legalized.

Genova Burns By Michael C. McQueeny, Esq., Co-Chair, Cannabis Law Group

Although the current adult-use developments seem to be moving at a monotonous pace, the likelihood of passage is a foregone conclusion and the time to begin preparing is now. For example, the last round of requests for applicants to apply for licenses to operate a medical cannabis dispensary was first announced in late July; the actual application was released for the first time on August 1 and is due by August 31. Thus, the opening of this last round for applications resulted in a common refrain from virtually every applicant—they wished they had more time to prepare. Indeed, the time to prepare is right now and retaining the right legal and non-legal team is critical to navigate the complex legal and policy issues of this highly regulated and nuanced industry. We’ve advised and represented clients not only in connection with applications for licensure, but in all aspects of the formation and operation of cannabis companies.

Greenbaum, Rowe, Smith & Davis LLP By Jack Fersko, Esq., Chair, Cannabis Industry Practice Group

After launching an interdisciplinary Cannabis Industry Practice Group in 2018, our firm has focused on guiding clients with an interest in the cannabis space based on our deep knowledge of New Jersey’s statutory laws and regulations. We provide guidance as to where the industry currently stands and where it is likely to go from both legal and business perspectives and advise on the key components of acquiring a cannabis license (e.g. real estate, corporate formations, financing and insurance). It is critical to consider the economic and social justice opportunities related to a legalized cannabis industry and their potential to spur economic development and job creation—especially given New Jersey’s population and geographic location. Moving forward, and given the inevitable growing pains still ahead, proper planning and risk mitigation strategies should be of paramount importance to both the state and industry participants.

Harwood Lloyd LLC By John W. McDermott, Esq., Partner, Cannabis Practice Leader

A host of opportunities will be created as New Jersey moves toward uniting its medical cannabis industry with a legalized recreational one. Notwithstanding the same, the addition of recreational sales will also create a host of bureaucratic difficulties integrating traditional business, lending, zoning and employment laws (to name a few), with both federal and state regulatory laws—some of which conflict with each other. Harwood Lloyd’s professionals are familiar with navigating these challenges and look forward to working with those seeking to capitalize on the opportunities this growing industry will present. The regulation and controlled distribution of cannabis will help stimulate job creation and foster business opportunities for entrepreneurs, while concurrently offering an added source of tax revenue to help alleviate the heavy fiscal burden currently plaguing our state.

McCarter & English, LLP By Patrick Harrity, Esq., Cannabis Practice Founder

Our advantage over most law firms stems from our representation of medical and recreational cannabis clients out west and our experience in a number of emerging growth sectors. That experience allows us to identify cannabis companies’ immediate and future needs and measure where that overlaps with our capabilities. For cannabis clients, we have done company formation, capital-raising, licensing applications, government relations and regulatory work. Our attorneys have provided commentary on New Jersey’s pending legislation, preparing us for the concerns of prospective cannabis clients, which, when the sector matures, will need guidance on tax, patent, brand protection, real estate and land use, insurance coverage, bankruptcy, employment, products liability and electrical energy work. The challenges will include compliance with regulations—particularly those that will supplement the law—and meshing what’s allowed in New Jersey with what federal law prohibits. The opportunity appears endless, based on what has happened in western states that allow recreational use.

Norris McLaughlin, P.A. By Keya C. Denner, Esq., Chair, Cannabis Law Group

Shortly after Governor Murphy took office, we identified that it was not a question of “if”, but “when” we would have an adult-use market in New Jersey. In response, we created our Cannabis Law Group from a diverse group of lawyers spanning virtually every practice area at our firm. The attorneys in our Cannabis Law Group are constantly attending industry events and sharing our knowledge with each other so that we can better prepare our clients for entering this space. The cannabis industry is rife with challenges, from obtaining site control of suitable property in a town that is welcoming, to securing funding in a mainly closed financial market, to mastering a web of extremely tight regulatory controls. For those clients who are committed and willing to persevere, there will be opportunities to get in on the ground floor of a new micro-economy in our state.

Riker Danzig Scherer Hyland & Perretti LLP By Zahid N. Quraishi, Esq., Partner, Cannabis Law Group

The attorneys in our Cannabis Law Group emphasize the importance of being prepared and making early progress. Securing financing, finding a location, and obtaining municipal support are among the many tasks that can be completed before cannabis becomes legal. Our goal is to walk clients through those steps in a way that positions their business to enter the industry early and efficiently. Also, due to the New Jersey Legislature’s stated emphasis on social equity and community involvement, our local communities have the most to gain from legalized cannabis; the state’s cannabis industry is unlikely to be dominated by out-of-state conglomerates. Rather, expect to see a cannabis industry comprised of small and mid-sized businesses with local roots that can achieve the state’s objective in engaging local communities. As a regional law firm, we strongly identify with those goals and will work diligently to help our clients succeed in this space.

Scarinci Hollenbeck By Daniel T. McKillop, Esq., Chair, Cannabis Law Group

One of the most significant impacts of legalized cannabis in New Jersey will be with respect to labor and employment issues. To address this, we are counsel-ing clients regarding the language of the proposed legislation pertaining to New Jersey’s coming adult-use cannabis program and the separate legislation designed to expand the current medical cannabis program. We are then assisting clients with reviews of their existing employee policies and handbooks and providing insight regarding necessary revisions. Beyond labor concerns, we are also counseling clients in understanding the business opportunities, risks, and best practices pertaining to participation in the legal cannabis industry. This effort includes review of the legislation or existing law at issue, strate-gizing as to the best path forward for each individual client and then immediately executing on each client’s plans to the greatest extent possible so that the client is ahead of developments in Trenton.

Sills Cummis & Gross P.C. By Robert E. Schiappacasse, Esq., Co-Chair, Cannabis Industry Practice Group

Rather than pursue a course of action based on what might be, we think clients are better served by a wait-and-see approach giving them and us the ability to immediately pivot in the right direction when and if legalization becomes a reality. That said, we know from the medical cannabis landscape in New Jersey that locating real estate to support a cannabis line of business can be a challenge—one we expect to continue. So, we do re-commend that clients begin the process of locating potential sites for review in anticipation of legalization. We also know from our experience with the medical cannabis license applications that having a quality consultant on board to assist in the application process is critical. We suggest that clients begin the process now of interviewing possible consulting teams so there is no delay in moving for- ward if legalization occurs.

Wilentz, Goldman & Spitzer, P.A. By Angelo Cifaldi, Esq., Shareholder, Co-Chair, Cannabis Group

We advise clients in all aspects of cannabis law. Recently, we represented clients in connection with Alternative Treatment Center applications for a license under New Jersey’s expanded medical marijuana program. This work was extensive and involved significant research and preparation. The challenges and opportunities here are likely to mirror those of California, Washington, Colorado and other states that have legalized cannabis. We also anticipate opportunities and challenges specific to New Jersey, such as unique energy law issues.



Murphy Administration Proposes Rules for NJ’s Re-Entry into Regional Greenhouse Gas Initiative

FULFILLING HIS PLEDGE TO “restore New Jersey to a national leadership role in the fight against climate change and sea-level rise,” Gov. Phil Murphy has announced that the New Jersey Department of Environmental Protection (NJDEP) has formally proposed two rules that will steer New Jersey’s re-entry into the Regional Greenhouse Gas Initiative (RGGI).

The RGGI is made up of Mid-Atlantic and New England states working to reduce carbon dioxide gas emissions from the energy sector through a cap-and-trade auction process that encourages more market efficiencies, invests in renewable energy and improves power plant technology. The RGGI’s members are Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island and Vermont. Virginia is planning to join the RGGI.

Returning New Jersey to the RGGI has been a priority for Gov. Murphy since the outset of his administration. In January, the governor issued Executive Order 7 directing the state to rejoin the RGGI and develop a program that implements solutions that benefit communities that are disproportionately impacted by climate change.

New Jersey was a charter member of the RGGI and was a key member of the effort until the state’s withdrawal in 2012 under the Christie administration.

One of the proposed rules establishes the mechanisms for rejoining the RGGI and sets the initial carbon dioxide cap for the state’s electricity generation sector at 18 million tons in 2020, when the state will officially begin participating in the RGGI again. Through a combination of the RGGI’s required carbon dioxide reductions and achieving Gov. Murphy’s aggressive renewable energy goals, the NJDEP projects that the state’s greenhouse gas emissions will be 11.5 million tons by 2030.

The other rule proposal establishes the framework for how the state will spend proceeds from the RGGI carbon dioxide allowance auctions, with an emphasis on projects that will benefit disproportionately burdened communities.

NJDEP Commissioner Opposes Federal Roll Back of Water Rule Protections

A Trump administration proposal to severely limit the number of wetlands and waterways protected by the federal Clean Water Act would penalize states that prioritize clean water and public health, says NJDEP Commissioner Catherine R. McCabe.

“The Trump administration’s proposal to roll back federal rules on clean water abandons our moral obligation to protect the environment for our children and grandchildren,” she explains. “It creates a ‘race to the bottom,’ encouraging states to loosen their own regulations and penalizing those that truly protect their residents and public health.”

Commissioner McCabe says that “New Jersey is committed to protecting its water resources. Water that is clean and safe is a critical natural resource for everything in our state and our country. Instead of creating a jigsaw puzzle of what is protected, we need strong leadership that will serve our communities by safeguarding all the water that flows through them.”

The proposal calls for the U.S. Environmental Protection Agency to repeal the 2015 rule defining the waters of the United States and revert to a definition from 1986. The key difference is that the 2015 rule provides sufficient protection to wetlands as “waters of the United States.” The 1986 rule does not. With reduced protections in border states such as New York and Pennsylvania, New Jersey could likely experience more flooding and reduced water quality downstream.