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.

Cannabis Stays Schedule 1 – Blame DEA, but Also Blame HHS.

As you already know, the DEA decided not to reschedule cannabis, and maintain its Schedule I status under the Controlled Substances Act.

In the coming days and weeks, there will be much analysis of the actual decisions – find them here and here.

This is certainly disappointing, albeit quite predictable.

I will be sharing more thoughts soon, but I wanted to make sure one thing is not lost: while the US Drug Enforcement Administration, Department of Justice, and Obama Administration deserve their share of blame, do not lose sight of the blame that rests with the U.S. Health and Human Services department.  HHS paved a clear course for the DEA to follow in denying the rescheduling request.  Here is their letter in full (starting on page 6):

Department of Health and Human Services, Office of the Secretary Assistant Secretary for Health, Office of Public Health and Science Washington D.C. 20201. June 25, 2015. The Honorable Chuck Rosenberg Acting Administrator, Drug Enforcement Administration, U.S. Department of Justice, 8701 Morrissette Drive, Springfield, VA 22152

Dear Mr. Rosenberg:

Pursuant to the Controlled Substances Act (CSA, 21 U.S.C § 811(b), (c), and (f)), the Department of Health and Human Services (HHS) is recommending that marijuana continue to be maintained in Schedule I of the CSA.

The Food and Drug Administration (FDA) has considered the abuse potential and dependence-producing characteristics of marijuana.

Marijuana meets the three criteria for placing a substance in Schedule I of the CSA under 21 U.S.C 812(b)(1). As discussed in the enclosed analyses, marijuana has a high potential for abuse, no currently accepted medical use in treatment in the United States, and a lack of accepted safety for use under medical supervision. Accordingly, HHS recommends that marijuana be maintained in Schedule I of the CSA. Enclosed are two documents prepared by FDA’s Controlled Substance Staff (in response to petitions filed in 2009 by Mr. Bryan Krumm and in 2011 by Governors Lincoln D. Chafee and Christine O. Gregoire) that form the basis for the recommendation. Pursuant to the requests in the petitions, FDA broadly evaluated marijuana, and did not focus its evaluation on particular strains of marijuana or components or derivatives of marijuana.

FDA’s Center for Drug Evaluation and Research’s current review of the available evidence and the published clinical studies on marijuana demonstrated that since our 2006 scientific and medical evaluation and scheduling recommendation responding to a previous DEA petition, research with marijuana has progressed. However, the available evidence is not sufficient to determine that marijuana has an accepted medical use. Therefore, more research is needed into marijuana’s effects, including potential medical uses for marijuana and its derivatives. Based on the current review, we identified several methodological challenges in the marijuana studies published in the literature. We recommend they be addressed in future clinical studies with marijuana to ensure that valid scientific data are generated in studies evaluating marijuana’s safety and efficacy for therapeutic use. For example, we recommend that studies need to focus on consistent administration and reproducible dosing of marijuana, potentially through the use of administration methods other than smoking. A summary of our review of the published literature on the clinical uses of marijuana, including recommendations for future studies, is attached to this document. 7

FDA and the National Institutes of Health’s National Institute on Drug Abuse (NIDA) also believe that work continues to be needed to ensure support by the federal government for the efficient conduct of clinical research using marijuana. Concerns have been raised about whether the existing federal regulatory system is flexible enough to respond to increased interest in research into the potential therapeutic uses of marijuana and marijuana-derived drugs. HHS welcomes an opportunity to continue to explore these concerns with DEA.

Should you have any questions regarding theses recommendations, please contact Corinne P. Moody, Science Policy Analyst, Controlled Substances Staff, Center for Drug Evaluation and Research, FDA, at (301) 796-3152.

Sincerely yours, Karen B. DeSalvo, MD, MPH, MSc Acting Assistant Secretary for Health

 

5,000 State Legislators and Staff Visit Chicago – Some to Talk About Cannabis

Starting today, legislators and their staff from state governments throughout the U.S. are arriving in Chicago.  Over 5,000 of them.

It is part of the annual National Conference of State Legislatures (“NCSL”) Summit.  State legislators from California to Maine, Florida to Washington, Alaska and Hawaii will converge on the Windy City to share best practices, listen to Melinda Gates, attend late night parties hosted by corporations and lobbying firms, and probably eat as much deep dish pizza as they can find.

There are also exhibitors at the convention hall, including, seriously, the American Association for Nude Recreation (appropriately, my firm’s firewall blocked my viewing of this site for research purposes, so click the link at your own peril).

What does this have to do with cannabis?

There will be several formal and informal meetings and panels discussing issues in the industry, notably a NCSL panel on cannabis-industry banking:

Banking Services for Marijuana-related Businesses
Summary: Alaska, Colorado, Oregon, Washington and the District of Columbia now allow the recreational use of marijuana. Twenty-five states, the District of Columbia and Guam allow medical marijuana. Marijuana businesses are struggling to find banks and credit unions willing and able to work with them despite recent federal guidance for financial institutions. Colorado tried to create a cooperative and was denied approval for deposit insurance. Bills are pending in Congress that ease federal restrictions. Hear about efforts to help the industry move beyond the cash-only model.
Moderator: Diana Clay, House of Representatives, Arizona Legislature
Speaker: Don Childears, Colorado Bankers Association
Speaker: Senator Bill Coley, Ohio
Speaker: Taylor West, National Cannabis Industry Association, Colorado
Speaker: Representative Jennifer A. Williamson, Oregon
.
Great to see speakers from critical states like Colorado and Oregon working to address this issue, as well as the venerable Taylor West from NCIA.
.
I will also be speaking on a panel hosted by the Marijuana Policy Project, “Medical Cannabis in Illinois – A Virtual Tour.”
.
It may not be as sexy as the 4-hour session titled, “The Mason’s Manual Commission Working Group on Internal Citations”, but it is comforting to see legislatures around the country taking the cannabis banking issue seriously.  The sooner we find a national solution to issues like institutional banking, the sooner we can reduce industry-related crime, avoid irrational interest rates from private lenders, and reinvest proceeds into the community and business expansion the way normal businesses do.

Anonymous DEA Lawyer Gets It Wrong On Marijuana Rescheduling, Surprising No One

By now you have heard increased chatter that the federal government may reschedule cannabis.  I covered a sliver of the potential impact on Illinois here.

The most recent rumor was that, even though the DEA blew their self-imposed June 30 deadline, the DEA would reschedule marijuana as Schedule II (“drugs with a high potential for abuse” on August 1st.

August 1st came and went – no big DEA announcement.  Just silence.

I am annoyed that the DEA has not yet acted, but what really bugs me is that a California attorney, hiding behind anonymity, would peddle such a story when there was no truth to it.

The Santa Monica Observer claimed to have the scoop – obviously we can’t verify if the Observer did, in fact, have an anonymous DEA lawyer, or if it was all made up.  Never read the Santa Monica Observer before?  I’m not judging, but a headline story yesterday was:

Former Prison Inmate Robs WY Bank, Throws the Money in the Air, & Waits for Police

My guess is it looked something like this.

Back to the DEA, let’s suspend any doubt – What if there really is a DEA lawyer in California that sat down with the Observer on several occasions and lied about August 1st being the set date to announce a change in cannabis’ status under the Controlled Substances Act?

So what’s the bottom line? Is medical marijuana legalization really going to happen this year?

[levels his blue eyes at mine]. Yes. Because there’s too much money to be made. And because it’s an important public policy and because there are already a lot of people using cannabis. This activity is going to happen on the margins anyway. It’s unimaginable that it would just be allowed to continue forever on the margins.

This may surprise some of you, but lawyers are not supposed to intentionally lie about things.  Especially in public.  Most of all involving government actions.

Lawyers are prohibited from public misrepresentations.  Illinois attorneys cannot: engage in conduct involving dishonesty, fraud, deceit, or misrepresentation.  California lawyers will be investigated by their disciplinary agency following crimes involving “misrepresentation, fraud or deceit,” as well they should.

If a California DEA agent deliberately misrepresented August 1st as a date of government action, and then walked off into the California sun, he should be held accountable.

Now that we know it won’t be August 1st, the real question is – will the DEA reschedule or deschedule cannabis before the end of the Obama Administration?

It is possible that cannabis will be rescheduled, though much less likely that it will be taken off the US Controlled Substances Act scheduling altogether.  From a political perspective, every day that passes without DEA action makes it less likely to happen before we have a new President sworn in January 2017.  I’ll be sure to keep you posted on any news on this front, but in the meantime 1) don’t bet the farm on predictions by any “anonymous DEA lawyer,” and 2) don’t rob a bank just to throw the money in the air waiting for the cops to arrive.

Illinois Decriminalizes Marijuana. Really.

Huge (albeit expected) news today that Illinois Governor has signed SB2228 – otherwise known as the Marijuana Decriminalization Bill!

Here is what it does:

  1. Possession of 10 grams or less of cannabis is now only subject to a fine of $100-$200.
  2. Changes our driving while impaired laws, setting the maximum cannabis impairment standards at 5 nanongrams of THC in whole blood, or 10 nanograms of other bodily substances.
  3. Paves the way for automatic expungement of current arrests that fall under the civil penalty/fine starting 6 months from today.

Governor Rauner did the right thing today, and let’s give due credit to the incredible State Representative Kelly Cassidy and State Senator Heather Steans.  Maybe you want to call their office and thank them, give a small contribution, or let them know the next time you see them how much you appreciate what they’ve done?

Effective Immediately.  BOOM-shacka-lacka.

 

IL Courts Push For Unprecedented Med Cann Expansion

The action continues for the Illinois Medical Cannabis Program, with courts stepping in to push the program to add new medical conditions.

Not since Arizona’s administrative judge forced the government to add PTSD has the judiciary weighed in so heavily on the expansion of a medical cannabis program.

Let’s recap:

  1. PTSD – We covered that here and we are still waiting to hear if IDPH will appeal the ruling.  We’ll know more in the next few days.  Since SB10 (already signed into law by the Governor) added PTSD, the question of whether to appeal raises bigger issues for IDPH (such as executive power, and what the ruling means for other pending patient lawsuits like for intractable pain).
  2. Migraines – last week Judge Novak ruled that migraines, too, were inappropriately denied by IDPH.  Unlike with PTSD, Novak reversed the denial but remanded the case – sending it back to IDPH to consider this specific condition.
  3. Irritable Bowel Syndrome (IBS) – Judge Demacooulous today ruled in a similar way as migraines, sending the condition back to IDPH for a new review.

Between these three decisions, we now have a template for the remaining patient-condition cases.  Judge Cohen is likely to rule in the same way for a) chronic post-operative pain and b) osteoarthritis as he did for PTSD.  The other judges are likely to reverse and the remand the cases (intractable pain, autism, Polycystic Kidney Disease)- shipping them back to IDPH for a new review.

What’s next?

You should expect the next news to be whether IDPH appeals the Cohen/PTSD decision.

If they do not, there is a much better chance that osteoarthritis and chronic post-operative pain are coming soon to a medical cannabis program near you.  If they appeal, all the conditions could be put on hold while the litigation plays out.

Either way, PTSD is here for good (as is terminal illnesses).

Keep your seatbelts on, campers – this ride ain’t over yet.

What if Illinois were more like Colorado?

       VS.             

 

Colorado had $117 million dollars in cannabis sales in the month of April.  In one month.  $117 million.

Illinois was a little less than that.  $2.57 million in medical cannabis sales in June 2016.

Of course the comparison is not fair – looking back to Colorado’s medical cannabis sales in 2013 (before recreational sales began in 2014), medical sales were still nearly $27 million per month.  Ten times that of Illinois, and Colorado has less than half the population.

As you probably already know, all of this is by design.

Illinois purposefully designed a new medical cannabis law that was heavily regulated, and limited to a small number of medical conditions (excluding chronic pain).  Colorado’s medical cannabis law developed over many years, and was designed to be liberal and inclusive.  The results are clear.

But what if Illinois had been more like Colorado or California?  What if physician recommendations were more like a suggestion than a strictly-enforced, physician license-risking requirement? What if we had added severe pain, or had unlimited business licenses to grow or sell, or if Illinois patients could grow their own cannabis at home?  As a former regulator, I am instinctively partial to strong regulations and government oversight – but this comes at a price.

For starters, we know Illinois would have hundreds of thousands of medical cannabis patients if the law had reflected California or Colorado.  In turn, there would have been more revenue and taxes, more patients with less pain and better health, more diversity in products and more of a free market.

But maybe the biggest difference would be less tangible, and more of a policy shift – I think it would change the way we think about cannabis – and it would have a profound impact on social justice and criminal justice.

If home cultivation were permitted, would cannabis be so stigmatizing?  No, of course not.

If medical cannabis were more easily accessible to those in daily pain, would we have such opioid addiction and drug incarceration problems?  No, of course not.

If Illinois had a medical cannabis program that reflected those last seen in Colorado and Washington, would we have more jobs, more local tax revenue, and a smaller black market for marijuana?  Yes, of course we would.

Luckily, Illinois is on the verge of fixing one of these problems: decriminalizing possession of small amounts of cannabis.  In the next few days SB 2228 is set to be enacted into law – if you want to let Governor Rauner know why cannabis decriminalization is a step in the right direction, you can contact him about SB2228 here.

Why Pot Lawyers Have More Fun

It is a lot of fun being a cannabis attorney.

For the non-attorneys reading this blog, you might not be aware of the endless ways to practice law.  For starters, you can be a litigator, a government attorney, and in-house counsel, or private practice corporate lawyer.  You could focus on family law, public housing rights, labor disputes, real estate, sports law, and yes, even marijuana.  There are some commonalities for all of these attorneys:

-We all attended multiple years of law school learning to “think like a lawyer.”

-We all have a code of ethics and professionalism to follow.

-We all know the TV show Law & Order is as accurate in depicting the practice of law, as Grey’s Anatomy is in depicting the practice of medicine. (Note – there is more overlap than you think)

Many of the lawyers I know enjoy their jobs, but they don’t love them.  Some are significantly underpaid in government or non-profit jobs, others make plenty of money but are unfulfilled by the work.

pot-lawyers

 

Depending on the subject area, a lawyer may be working in a newer segment like my friends in social media or comic book law.  They may also be working on boring, super-old law that existed before any of us were born.  The lawyer may be researching insurance coverage laws, or arguing with other lawyers about the meaning behind the word “they.”

While a lawyer’s personality is the best indicator of what kind of law they will most enjoy, I would like to suggest that pot law is the most fun.

Our work is anything but boring.

Pot lawyers get the opportunity to work in the gray zone; developing an area of law with no precedent.

This is an industry that literally is forbidden by the federal government but somehow exists and is thriving in 50% of the states in the U.S.

Mind.  Blown.

Cannabis law transcends nearly every other kind of law – so a true “cannabis lawyer” actually works in many other practice areas, including corporate, litigation, regulatory, intellectual property, banking, employment, finance, product liability, and of course, criminal law.

More often than not, a legal question in the cannabis industry is answered with “I don’t know, but here is the most likely answer.”  We counsel clients on high risk activities, with the backdrop of inevitability of national marijuana reform.  We hang on every new state and local regulation, and collectively hold our breaths for when marijuana is no longer a Schedule 1 drug under the U.S. Controlled Substances Act (more on that topic in future blog posts).

We are an indirect part of an movement working to right the wrongs of decades of the War on Drugs.  We work to create an industry that reflects the diversity of the community it serves.

We hear pot jokes.  Endless, mostly recycled, pot jokes.

Cannabis law is expanding into traditional companies and traditional law firms.  Before you know it, cannabis law will be mainstream and common.

Until then, just know that the pot lawyers are having the most fun.

IL Circuit Court Lowers the Boom: Tells IDPH to Add PTSD Within 30 Days

The Illinois Medical Cannabis Pilot Program (“MCPP”) received its second bombshell in two days.  Jabs v. IDPH, a case that the Illinois Cannabis Bar Association has been closely following, received a strong ruling in favor of petitioner Jabs and against the Illinois Department of Public Health (“IDPH”).

The director of the Illinois Department of Public Health has 30 days to add Post-Traumatic Stress Disorder to the list of medical conditions that are treatable with medical marijuana, a Cook County judge ruled today.

Cook County Associate Judge Neil H. Cohen found that IDPH Director Nirav Shah violated due process rights and used a standard not outlined in state law when he denied plaintiff Daniel Jabs’ petition to include PTSD on a list with 39 other conditions eligible for treatment with medical cannabis under the Compassionate Use of Medical Cannabis Pilot Program Act.

“This is a victory today for all those who suffer from PTSD, and especially our military veterans,” said Michael K. Goldberg, a partner at Goldberg Law Group LLC who represented Jabs.

Jabs, an Army veteran who served in the Iraq War, submitted a petition to the IDPH in February 2015 seeking to add PTSD as a debilitating condition for which medical cannabis can treat patients under the act.

The case is one of 8 similar cases filed by petitioners whose medical condition was not added to MCPP.  The decision rested with the IDPH Director, despite a supportive vote by the Medical Cannabis Advisory Board recommending the additions.  The judge in the PTSD case (Cohen) has two other cases on this matter including chronic post-operative pain and osteoarthritis.  Other conditions that have pending cases include migraines, IBS, polycystic kidney disease, intractable pain and autism.

Not surprisingly, this is a big relief for Mr. Jabs.  What is very surprising, however, is the strong language used by Judge Cohen:

“The Director’s legal duty was to review the evidence, review the advisory board’s recommendations based thereon and render a final decision accepting or denying the proposal.  Instead, Director Shah engaged in a private investigation, hidden from public view and more importantly, hidden from the parties and arrived at his conclusion based thereon.  This process was constitutionally inappropriate.” June 28, 2016 Memorandum and Order, Jabs v. IDPH, 15 CH 16344.

The real question remaining is whether this will matter at all?

As you might recall, SB10 is a bill that sits on Governor Rauner’s desk for signature. SB10 does several things, including extending MCPP through mid-2020, and explicitly added PTSD. If the Governor signs the bill (as he indicated he would), PTSD will be added on its own without the lawsuit.

The lawsuit ruling raises a number of legal and practical questions.

Will IDPH appeal the ruling? We don’t yet know, but it is possible.  A decision of whether or not a state agency appeals a ruling like this includes many factors, and many decision-makers including IDPH, the Office of the Governor and the Office of the Attorney General.  These moments are much more complicated than you might imagine.  We’ll soon find out the answer.

Will Judge Cohen rule the same way on the other two cases in front of him? Based on the tenor of his ruling, I would expect he will rule in a similar way on the other two cases so long as the facts are similar.

What about the other conditions sitting in front of other judges?  TBD. They may rule in a similar way, but they do not have to.

What about other conditions denied by IDPH that no one has filed a lawsuit for?  This ruling would have no immediate effect on those conditions.

Is this limited only to military-related PTSD?  No, all forms of PTSD certified by an eligible physician would be included.

How big of a deal is this decision?  Let’s just say, outside of the cannabis context, I am hard-pressed to recall such a scathing ruling against a state agency administrative decision.

Assuming this decision is upheld, and Governor Rauner follows through by signing SB10, will this impact the future makeup of the Advisory Board and the process used by IDPH in reviewing those recommendations?  Bet on it.

What other craziness could impact MCPP this week? Who knows, but stay tuned. There is surely more news to come.

1 2 3 4 5