A Cannabis Program Without Lawyers. What Could Possibly Go Wrong?

This blog has documented many of the unusual and challenging aspects of the cannabis industry.  Aside from lack of banking, inequitable taxation, and constant pressure from the federal government, we are increasingly seeing state cannabis laws implemented with lawyers forced to the sidelines.

How can this be?  In an area where state regulation is what keeps the feds at bay, and the legal risks and nuances are endless, who would want attorneys to be barred from assisting?

Yet, that’s exactly where we are headed in some states.

It has become common for new cannabis states to briefly grapple with how, and when, lawyers can assist cannabis clients.  For a thorough review of the problem, see our earlier guest blog here.  Typically a professionalism board will freak everyone out and suggest that a lawyer can’t help a cannabis client on a license application, or the lawyer can’t invest in a cannabis business – only for the state Supreme Court or comparable authority find a way to let lawyers do their job.

Until they don’t.

It was a close call in Hawaii as the application date approached, and Illinois had some lawyers sweating as we awaited a change to our Rule 1.2(d).  But some states are still on the fence.

New Mexico is giving lawyers indigestion with their latest advisory opinion which seems to allow limited attorney representation of cannabis businesses nine (9) years into their program.  And Ohio has (at least temporarily) frozen out lawyers from assisting businesses applying for medical marijuana licenses.  What does that mean, exactly?  Read for yourself:

Under Prof.Cond.R. 1.2(d), a lawyer cannot deliver legal services to assist a client in the establishment and operation of a state regulated marijuana enterprise that is illegal under federal law.  The types of legal services that cannot be provided under the rule include, but are not limited to, the completion and filing of marijuana license applications, negotiations with regulated individuals and businesses, representation of clients before state regulatory boards responsible for the regulation of medical marijuana, the drafting and negotiating of contracts with vendors for resources or supplies, the drafting of lease agreements for property to be used in the cultivation, processing, or sale of medical marijuana, commercial paper, tax, zoning, corporate entity formation, and statutory agent services. See also, Colo. Op. 125 (2013).  Similarly, a lawyer cannot represent a property owner, lessor, supplier or business in transactions with a marijuana regulated entity, if the lawyer knows the transferred property, facilities, goods or supplies will be used to engage in conduct that is illegal under federal law.  Even though the completion of any of these services or transactions may be permissible under Ohio law, and a lawyer’s assistance can facilitate their completion, the lawyer ultimately would be assisting the client in engaging in conduct that the lawyer knows to be illegal under federal law.

That is the equivalent of going into surgery to have a gall bladder removed, but your physician got tied up and couldn’t make it, so you’ll just use your cousin Earl who has watched a bunch of Grey’s Anatomy.

Alas, maybe our blood pressure is needlessly rising – looks like the Ohio Supreme Court may step up to fix the problem.

Perhaps the lesson here is that we may not appreciate the value of attorneys until we’re told we can’t use them – especially in an industry as risky as cannabis.

Leave a Reply

Your email address will not be published. Required fields are marked *