The Ethical Cannabis Lawyer

17 Nov The Ethical Cannabis Lawyer

Last Friday, I spoke on a panel for the American Bar Association (ABA) in Denver. It was the first conference for the ABA’s new Global Cannabis section and the first live event I’ve done since COVID started. The panel discussed “Legal Ethics in International Cannabis.” My colleague Adams Lee participated too, but on another panel covering the international cannabis trade. It was nice to get back out there.

Like all things cannabis, the lawyer ethics part can be a morass— especially when you start looking at international law and the rules of various jurisdictions all around the world. We deal with domestic ethics rules regularly and we have covered aspects of the U.S. regime previously on this blog. In this post, I’ll stay focused on U.S. law, and I’ll do a quick run-through of the ABA Model Rules of Professional Conduct (RPC) to help spot issues.

Since 1983, almost all states have adopted some version of the RPC, typically with commentary and related opinions. Familiarity with these rules is essential for lawyers. It is also useful for clients who wish to appreciate the standards to which advisors are held, and the contours of the attorney-client relationship.

ABA Model RPC 1.2(d): Scope of Representation

This one is where we always start. RPC 1.2(d) provides:

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.

Comment [9] elaborates on this provision, to note that RPC 1.2(d) doesn’t “preclude the lawyer from giving an honest opinion about the actual consequences that appear likely to result from a client’s conduct.” The comment also clarifies that a lawyer giving advice does not necessarily become a party to bad conduct, and the comment makes a “critical distinction” between a lawyer presenting a legal analysis, and “recommending the means by which a crime or fraud might be committed with impunity.”

Many states have examined Rule 1.2(d) issues presented by state legalization of marijuana, whether for medical or adult use. Typically, an ethics opinion or a rule change follows. On one side of the debate is a strict “textual” approach, precluding lawyers from offering any form of assistance; whereas the opposing view takes a pragmatic view of client welfare. States have been looking at this issue for ten years now in the context of marijuana. They don’t always get it right.

The Arizona State Bar was the first to issue an ethics opinion, back in 2011. The opinion concluded that a lawyer could advise and assist a client under the Arizona Medical Marijuana Act, but the lawyer must also explain that the client’s conduct may violate the federal Controlled Substances Act. Many other states have reached similar conclusions, through court rulings and advisory opinions (you can find a good and not-too-stale summary here).

Other states have issued problematic and regrettable rulings– and in very recent times. The Supreme Court of Georgia, for example, issued an order on June 21, 2021 denying a motion to amend its RPC 1.2(d). This came after the state bar association sought to amend the rule to allow lawyers to assist clients in state-legal cannabis business. (Georgia is a cannabis backwater, but it legalized the growth, manufacture, and sale of low-THC oil in 2015.)

In denying the motion, the Georgia Supreme Court deferred obsequiously to federal law and the illegality of cannabis. It held that passage of state laws permitting and regulating federal crimes do not alter the 1.2(d) prohibition against “counseling and assisting clients in the commission of criminal acts.” Essentially, the court told Georgia businesses following Georgia laws that they will not receive fair treatment by Georgia courts. This was a disappointing ruling, to say the least.

The order also noted that the requested amendment to Rule 1.2 would not necessarily be limited to state-legal, low-THC oil, but “might well apply to a wide range of conduct constituting a crime under federal law that simply has no corollary state criminal sanctions.” An optimist would read that as a hint that the court is open to a more focused amendment. For now, though, lawyers and their potential cannabis clients are stuck. A lawyer advising a business complying with state law in the sale of low-THC oil could theoretically lose her license.

Because of the range of interpretation and commentary on RPC 1.2(d) at the state level, it is critical for any lawyer wishing to advise in the cannabis industry to familiarize herself with the status of the local rule. And it’s important for local businesses to understand whether they will have dependable access to legal services, or whether they are impaired.

ABA Model RPC 8.4(b): Misconduct

This rule gets less play than 1.2(d), although it is closely related. RPC 8.4(d) provides that:

“It is professional misconduct for a lawyer to commit a criminal act that reflects adversely on the lawyer’s honesty, trustworthiness or fitness as a lawyer in other respects.”

It’s a pretty simple rule. One can see how it resonates through almost everything a lawyer says and does.

In the cannabis context, one example of 8.4(b) in action involved a lawyer retained by two medical marijuana dispensaries in Colorado. The lawyer had established lawyer trust accounts (called “IOLTA” accounts) at a local bank, to pay bills and taxes for the client stores. However, the bank did not allow accounts that were connected with cannabis businesses, and the lawyer knew this. He was hauled up and sanctioned by the court.

Other states, most recently New York, have taken a close look at 8.4(b) in the context of whether a lawyer’s use of marijuana, or ownership interest in a marijuana business, “reflects adversely” on the lawyer as set forth above. The New York Bar Association ultimately decided that non-excessive marijuana use should be acceptable, and that lawyers should also be allowed to own cannabis businesses. Still, we have advised lawyers to proceed with caution there, and to read the rules closely in other states.

Other states, like California, have considered the question of whether 8.4(b) and related considerations should bar an applicant from licensure to begin with. In the California example, the State Bar Association determined:

Use of alcohol or other drugs alone does not provide a basis for a negative moral character determination, but may be relevant when the substance use is related to acts of misconduct. An applicant who has engaged in acts of moral turpitude related to illegal drug use is not required to obtain treatment or admit addiction in order to show rehabilitation; however, voluntary enrollment in some form of substance abuse treatment may serve as an indicium of rehabilitation.

That seems like the right approach to us. But each state is unique with respect to admissions and licensed attorney conduct, and once again– it’s incumbent on lawyers and applicants to know the rules of the game.

ABA Model RPC 1.1: Competence

Discussions on ethical cannabis lawyering often omit discussion of RPC 1.1. That’s unfortunate, because 1.1 is critical rule. We have written before about the competence issues that surface periodically with law firms large and small in the cannabis space. Ultimately, cannabis is a highly dynamic, complex regulatory sphere at the state and local levels, in addition to the nuanced interplay of state and federal laws. The amount of change we see from year to year is simply incredible in most states.

All of this means cannabis lawyering is not an area for generalists, or for law firms unequipped to work in the space. When our cannabis business lawyers are hired as an expert witnesses, a common set of facts involves a cannabis business suing a lawyer or law firm who gave bad advice; or, as we lawyers put it, “advice that fails to meet the relevant standard of care.” Often, these lawyers simply didn’t understand the rules, many of which are obscure and non-intuitive. Thus, RPC 1.1 is also a critical piece of the regime in ethical cannabis lawyering.