Legal Ethics, Marijuana

Lawyers, Pot Businesses, And Ethics Remain Hazy In Some States

States that have legalized medical or recreational cannabis should allow their lawyers to advise and assist companies trying to comply with state and local laws.

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Hilary Bricken

Hilary Bricken

You would think with 25 states and the District of Columbia having some form of marijuana legalization, state bar associations would no longer be prohibiting attorneys from representing cannabis businesses based on ethical grounds. Ohio should make you think otherwise.

In almost all states, Rule of Professional Conduct 1.2(d) reads something like the following:

A lawyer shall not counsel a client to engage, or assist a client, in conduct that the lawyer knows is criminal or fraudulent, but a lawyer may discuss the legal consequences of any proposed course of conduct with a client and may counsel or assist a client to make a good faith effort to determine the validity, scope, meaning or application of the law.

Because marijuana remains illegal under federal law, RPC 1.2(d) creates an obvious ethical tension for attorneys in states where is marijuana legal under state law. State bars are not troubled by attorneys advising their clients on the content and interpretation of state marijuana laws, but some of them do not want their attorneys to provide legal assistance to marijuana businesses. Does a lawyer’s filing articles of incorporation for a marijuana business constitute criminal assistance? Different states have different opinions.

Colorado, Washington, Oregon, and Alaska are all of the view that their attorneys may advise and assist their clients on business law issues, including state and local licensure.

Colorado now has a comment — Comment 14 — to its RPC 1.2, specifically allowing attorneys to advise and assist marijuana businesses:

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A lawyer may counsel a client regarding the validity, scope, and meaning of Colorado constitution article XVIII, secs. 14 & 16, and may assist a client in conduct that the lawyer reasonably believes is permitted by these constitutional provisions and the statutes, regulations, orders, and other state or local provisions implementing them. In these circumstances, the lawyer shall also advise the client regarding related federal law and policy.

Washington did largely the same thing by adding the following Comment 18 to its RPC 1.2(d):

At least until there is a change in federal enforcement policy, a lawyer may counsel a client regarding the validity, scope and meaning of Washington Initiative 502 (Laws of 2013, ch. 3) and may assist a client in conduct that the lawyer reasonably believes is permitted by this statute and the other statutes, regulations, orders, and other state and local provisions implementing them.

Unfortunately, not all states agree with Washington and Colorado, and just last week, Ohio’s State Supreme Court Board of Professional Conduct issued an official opinion barring Ohio attorneys from assisting in the formation of state-legal medical marijuana businesses because cannabis remains illegal under federal law. The opinion also clarified that Ohio attorneys are not permitted to consume medical marijuana, nor are they permitted to be personally involved in related businesses (something my law firm has always advised against anyway).

Ohio is not the only party pooper. Maine also maintains that attorneys cannot ethically assist medical marijuana businesses. Maine’s Bar Association has recommended a change to its RPC 1.2 to allow lawyers to provide business services and advice to cannabis businesses so long as the lawyer advises the client on concurrent federal marijuana enforcement policies.

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There’s also been at least one flip-flopper state on the issue. Hawaii’s ethics rules initially prohibited lawyers from assisting cannabis businesses, but the Supreme Court of Hawaii last year issued a ruling allowing lawyers to advise cannabis businesses so long as the lawyer also counsels the client “about the legal consequences, under other applicable law, of the client’s proposed course of conduct.” This jibes completely with the policy at my firm, which has included the following disclaimer on our blog and in our fee agreements:

Please be mindful that possessing, using, distributing and selling marijuana are all federal crimes and that this blog is not intended to give you any legal advice, much less lead you to believe that marijuana is legal under federal law. Please also note that even though marijuana is illegal under federal law, you will need to pay federal taxes just as though you are a legal entity. This is true even if you are a state law not-for-profit entity.

When my firm first started providing legal advice to cannabis businesses, the ethics rules in most states were murky on this. But we made the decision to test them by going forward, believing that the essence of a business lawyer’s job — both to clients and to the public as a whole — is to counsel clients on how to follow the law. It does not make sense for a state to enact laws and then prohibit its lawyers from counseling businesses within that state on how to obey the enacted laws. I should add that since day one, the regulators in the states in which we do most of our work (Washington, Oregon, California, and Florida) have agreed with this position and have on many occasions made this clear to us. They much prefer working with seasoned business attorneys than dealing directly with businesses that tend to have considerably less experience with interpreting laws and dealing with governments.

States that have legalized medical or recreational cannabis should allow their lawyers to advise and assist companies trying to comply with state and local laws. It ought to be that simple.

Hilary Bricken is an attorney at Harris Moure, PLLC in Seattle and she chairs the firm’s Canna Law Group. Her practice consists of representing marijuana businesses of all sizes in multiple states on matters relating to licensing, corporate formation and contracts, commercial litigation, and intellectual property. Named one of the 100 most influential people in the cannabis industry in 2014, Hilary is also lead editor of the Canna Law Blog. You can reach her by email at hilary@harrismoure.com.

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