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Is it ethical for a lawyer to advise a cannabis client?

 

The recent surge of States that have chosen to legalize marijuana through the legislative process is in direct conflict with federal law. To produce, process, possess, transport, or sell marijuana is a violation under the Controlled Substances Act (CSA). The tension between state and federal laws creates a dangerous ethical situation for any unsuspecting lawyer. The Model Rules of Professional Conduct pose a large hurdle for any lawyer hoping to engage with law-abiding (or not) cannabis entrepreneurs. For example, Model Rule 1.2(d) states:

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.

If interpreted narrowly, Model Rule 1.2(d) prohibits lawyers from counseling any person or any entity that even remotely relates to cannabis. While the state the lawyer practices in may have its own laws about marijuana consumption and sale, prohibition of this Schedule I drug still exists at the federal level. As a result, any marijuana-related conduct is technically “criminal” under this rule. The remainder of this rule does not help clarify what a lawyer is to do in a situation like this, but comment [9] of Model Rule 1.2(d) offers some guidance, reading:

Paragraph (d) prohibits a lawyer from knowingly counseling or assisting a client to commit a crime or fraud. This prohibition, however, does not preclude the lawyer from giving an honest opinion about the actual consequences that appear likely to result from a client’s conduct. Nor does the fact that a client uses advice in a course of action that is criminal or fraudulent of itself make a lawyer a party to the course of action. There is a critical distinction between presenting an analysis of legal aspects of questionable conduct and recommending the means by which a crime or fraud might be committed with impunity.

Still, the difference between “presenting an analysis” and “recommending” a course of action in this case is a slippery slope, separated merely by what seems to be little more than sentence construction; “here is the legal analysis and possible consequences of forming a cannabis-related entity in this State” versus “here is how you should go about forming your cannabis-related entity in this State to comply with local and state laws.” Model Rule 1.2(d) shifts a lawyer’s focus from external, acting as an advisee, to internal, attempting to avoid sanctions under the Model Rules. This shift cuts against Model Rule 2.1, which says:

In representing a client, a lawyer shall exercise independent professional judgment and render candid advice. In rendering advice, a lawyer may refer not only to law but to other considerations such as moral, economic, social and political factors, that may be relevant to the client’s situation.

A lawyer cannot be truly candid if she is primarily concerned with her own interests—avoiding ethical sanctions. Model Rule 2.1 offers a small amount of leeway for lawyers by acknowledging that they may refer to current moral, economic, social, and political factors in offering “candid advice.” Still, in a field like cannabis-law, these types of factors are anything but stable. To defend oneself against ethical allegations under the Model Rules on nothing more than circumstantial evidence of fluctuating social norms would be difficult.

Even if a lawyer chooses to look past Model Rule 1.2(d), she is at risk of violating other rules in the course of fully and competently representing her cannabis client. Model Rule 8.4(b) and (c) state: “It is professional misconduct for a lawyer to: (b) commit a criminal act that reflects adversely on the lawyer’s honesty, trustworthiness or fitness as a lawyer in other respects; (c) engage in conduct involving dishonesty, fraud, deceit or misrepresentation[.]”

One common and easy way in which a lawyer may violate Model Rule 8.4(b) and (c) is in relation to the banking and financial aspects of a cannabis client. Nearly all banks, being federal institutions, refuse to work with any person or entity connected to cannabis in any capacity. To do so would make banks liable for money laundering under federal law. In People v. Furtado, No. 15PDJ056 (Colo. 2015), a Colorado lawyer was found to have violated Model Rule 8.4(b) and (c) when he knowingly established and chose not to disclose the purpose of a bank account related to the payment of taxes and bills of a cannabis client at a bank that had a no-tolerance policy for any cannabis-related business. As such, many lawyers understandably choose to avoid cannabis-related matters altogether.

Model Rule 1.2(d), in conjunction with rules such as Model Rule 2.1 and Model Rule 8.4(b) and (c), disincentivizes lawyers from diving into a booming industry in desperate need of sound legal advice. Moving forward, States can follow one of three courses of action in the enforcement of the Model Rules of Professional Conduct. States can (1) choose not to enforce the rules, (2) interpret the rules such that they do not apply to cannabis-related conduct if the conduct is legal under state law, or (3) change the rules to offer more guidance on whether or not the rules will apply to cannabis-related conduct.

Sixteen (16) states— Arizona, Colorado, Connecticut, Florida, Hawaii, Illinois, Maryland, Minnesota, Nevada, New York, Ohio, Oregon, Pennsylvania, Vermont and Washington, along with the District of Columbia—have modified Model Rule 1.2(d) to offer more guidance. For example, the Supreme Court of Illinois amended the Illinois Rules of Professional Conduct, Rule 1.2(d) as follows:

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

(1) discuss the legal consequences of any proposed course of conduct with a client,

(2) and may counsel or assist a client to make a good-faith effort to determine the validity, scope, meaning or application of the law, and

(3) counsel or assist a client in conduct expressly permitted by Illinois law that may violate or conflict with federal or other law, as long as the lawyer advises the client about that federal or other law and its potential consequences.

Essentially, Illinois’s modification of Model Rule 1.2(d) allows a lawyer to advise a cannabis client as long as she puts the client on notice of the conflicting federal law and its potential consequences. Many of the other sixteen (16) States have taken a similar approach. However, in the States that have not expressly taken a stance on the matter, lawyers are still stuck in the catch-22 described earlier. One other place in the Model Rules that may offer guidance to a lawyer that wants to partake in this field is the Preamble, which outlines a lawyer’s responsibilities. Section [9] of the Preamble of the Model Rules of Professional Conduct acknowledges:

Virtually all difficult ethical problems arise from conflict between a lawyer’s responsibilities to clients, to the legal system and to the lawyer’s own interest in remaining an ethical person while earning a satisfactory living. The Rules of Professional Conduct often prescribe terms for resolving such conflicts. […] Such issues must be resolved through the exercise of sensitive professional and moral judgment guided by the basic principles underlying the Rules.

The “basic principles underlying the Rules” can be found in Section [2] of the Preamble, which instructs lawyers to be representatives, advisors, advocates, negotiators, and evaluators to clients.

Currently, there is no “right” or “wrong” answer to the ethical question of whether or not a lawyer may advise a client on cannabis-related matters in a State that has legalized said conduct. Lawyers can choose to forego advising clients in this emerging field, or lawyers can proceed with the knowledge that they are at risk of ethical proceedings and sanctions as a result of the normal and ordinary course of advising clients. The only way forward is for State legislatures to modify their Model Rules of Professional Conduct such that they align with recent changes to the legalization of cannabis, or for the federal government to end the prohibition against cannabis. Until one, or both, of these events occur, lawyers, clients, businesses, and society will continue to suffer as a result of the lack of concrete and unified legal counsel in an emerging field that needs guidance the most. At its roots, this question is one that must be answered by the legislature in the form of policy-making, not by lawyers on an individual, case-by-case basis.

 

-Zoe Lanier

 

 

The SAFE Banking Act

In a surprise moment of bipartisanship for a typically divided Congress, the House of Representatives on September 25 passed HB 1595, the Secure and Fair Enforcement Banking Act (“SAFE Act”) by a vote of 321-103.[1] The SAFE Act protects financial institutions providing services to cannabis-related legitimate businesses (“CRLBs”), including banks, credit and loan providers, and insurance agencies.[2] Such institutions would be protected from federal regulators taking adverse action against them for their participation in the legal cannabis industry.

Many industry insiders see the SAFE Act as a huge boon. Despite being an 8 billion dollar market in the United States, most cannabis business has historically been conducted in cash, due to a lack of available credit and banking services.[1] This has led to higher transaction costs, an inability to receive loans and other forms of financial assistance, and a higher degree of tax diversion than is seen in other, similar industries.[2] It also has left the industry open to theft and violence, including the murder of a Denver man outside a dispensary in 2016.[3]

Taking the cash out of the industry could make everyone safer and make business run smoother in a variety of ways, from sales to payroll, insurance, and taxes. The SAFE Act could also bolster the legitimacy and stability of the budding marijuana industry by giving the biggest financial players a seat at the table, with all their attendant political power.

Yet for some activists, this is also the bill’s biggest downside.[4] By providing federal protections for large financial institutions before such protections are extended to ordinary citizens participating in the industry, the SAFE Act could potentially exacerbate inequalities and undercut efforts to build social equity into the foundation of the cannabis industry.[5] It is also feared that the SAFE Act could derail more comprehensive efforts to protect and regulate cannabis at the federal level, by separating the interests of banks from those of the industry at large.[6]

The SAFE Act is one of several pieces of cannabis legislation currently moving through the Congress. Another, the Clarifying Law Around Insurance of Marijuana Act (“CLAIM Act”) would provide further protections for insurance companies insuring the cannabis industry[7]. And a third, the Marijuana Opportunity Reinvestment and Expungement Act (“MORE Act”) would remove marijuana from the Controlled Substance Act altogether, and start addressing the disproportionate consequences of the War on Drugs on disadvantaged communities across America[8].

As Queen Adesuyi, policy coordinator for the National Drug Policy Alliance, put it in an interview with Marijuana Moment, “We need to ensure that the sequencing of federal marijuana bills, especially under House Democratic Leadership, is well thought out and done in a way that centers the millions directly impacted by overenforcement. We want to avoid the banking bill becoming Congress’ only bite at the apple for cannabis reform this session.”[9]

The SAFE Act faces a difficult road ahead in the Senate, where Majority Leader Mitch McConnell has already stated his opposition. Whether the political weight of major financial institutions will be enough to push the bill over the threshold for passage remains to be seen.

-Jake Ziering

[1] The SAFE Banking Act Allowing Banks to Work with Marijuana Firms is Controversial. This is Why, Newsweek, Sep. 27, 2019, https://www.newsweek.com/safe-banking-act-banks-pot-industry-controversial-1461754

[2] Supra note 3.

[3] Supra note 3.

[4] Civil Rights Groups Urge Congress to Delay Marijuana Banking Vote, Marijuana Moment, Sep. 17, 2019, https://www.marijuanamoment.net/civil-rights-groups-urge-congress-to-delay-marijuana-banking-vote/

[5] Supra note 6.

[6] Supra note 6; Statement on House Passage of Marijuana Banking Bill, Drug Policy Alliance, Sep. 25, 2019, http://www.drugpolicy.org/press-release/2019/09/statement-house-passage-marijuana-banking-bill-commitments-judiciary-and

[7] High Hopes, Higher Hurdles for Pro-Cannabis SAFE Banking Act, Insurance Journal, Oct. 3, 2019, https://www.insurancejournal.com/news/national/2019/10/03/544395.htm

[8] Supra note 6.

[9] Supra note 6.

[1] House Passed Landmark Marijuana Banking Bill, Westword, Sep. 25, 2019,  https://www.westword.com/marijuana/us-house-passes-landmark-marijuana-banking-bill-11492056

[2] An Expert Analysis of the SAFE Banking Act, MG Retailer, June 3, 2019, https://mgretailer.com/business/legal-politics/an-expert-analysis-of-the-safe-banking-act/?utm_source=Mondaq&utm_medium=syndication&utm_campaign=View-Original

Welcome to the Chicago-Kent Cannabis Law Society Blog

Now is a very exciting time to be studying the field of cannabis law! As of the fall of 2019, adult use of cannabis is legal for recreational purposes in eleven states and the District of Columbia,[1] and for medicinal purposes in thirty-three states and the District of Columbia.[2] Furthermore, twenty-six states and the District of Columbia have decriminalized cannabis by replacing criminal penalties for possession and use of small amounts of cannabis with local fines, community service, or other penalties.[3]

Despite the rapid progress of state laws, cannabis remains illegal under the federal Controlled Substances Act (CSA) as a schedule I drug. [4] Schedule I drugs are considered to be the most dangerous, and are classified as having (1) “a high potential for abuse,” (2) “no currently accepted medical use in treatment in the United States,” and (3) “a lack of accepted safety for use of the drug or other substance under medical supervision.[5]” This classification of cannabis is in obvious tension with the findings of the majority of state legislatures, creating a unique and relatively unprecedented conflict between state and federal law.

Up to this point, the federal government has largely deferred to state laws in states that have legalized or decriminalized cannabis. While this policy was explicit under the Obama Administration’s infamous “Cole Memorandum,”[6] the rescinding of the Cole Memo by Attorney General Sessions has created new uncertainty.[7] While the vacuum of federal authority has had some positives – it has allowed, for instance, experimentation by the states with a broad array of legislative and regulatory structures – uncertainty has also caused many problems for producers, consumers, and lawyers involved in the cannabis industry.

This blog will focus on the unique legal problems – and their creative solutions – brought about by the continuing conflict between state and federal law. In each post, this central antagonism will be explored as it relates to diverse areas of practice: from family law to criminal law, taxing, banking and insurance, intellectual property, environmental regulation, products liability, and more.

We here at the Cannabis Law Society are very proud, and very excited to be your guides through this rapidly-evolving legal field. Check back weekly for new content from CLS authors around the country as together we explore this uncharted territory.

-Jack Shadid

 

References:

[1] http://www.ncsl.org/research/civil-and-criminal-justice/marijuana-overview.aspx

[2] http://www.ncsl.org/research/health/state-medical-marijuana-laws.aspx

[3] http://www.ncsl.org/research/civil-and-criminal-justice/marijuana-overview.aspx

[4] 21 U.S.C. § 812

[5] 21 U.S.C. § 812

[6] https://www.justice.gov/iso/opa/resources/3052013829132756857467.pdf

[7] https://www.justice.gov/opa/press-release/file/1022196/download

How Cannabis is Combating The War on Drugs With Illinois State Rep. Kelly Cassidy

This Monday State Rep. Kelly Cassidy gave Chicago-Kent’s Cannabis Law Society a lesson on cannabis legislation in Illinois. The event was part of CLS’s collaboration with the National Lawyers Guild for NLG’s annual Week Against Mass Incarceration.

With this year’s theme “the Drug War,” Chicago-Kent’s Cannabis Law Society chapter took the opportunity to spotlight the progress the cannabis space is making in moving forward from the harms of the failed Drug War, and how legislators like Rep. Kelly Cassidy are taking steps to ensure those disproportionately harmed by the Drug War have access to new opportunities in cannabis.

Read more about Rep. Kelly Cassidy’s work in cannabis legislation.

Rep. Cassidy held our attention with not-oft-taught information on how the Illinois cannabis industry functions, its role in everything from youth addiction rates to tax revenue, and what sets Illinois apart as an enviably comprehensive approach to cannabis legislation.

 

During Q&A, the Cannabis Law Society President asks about the role of new cannabis PACs in Illinois licensing. Cannabis PACs are an increasing concern among Chicago’s grassroots cannabis community.

 

Illinois State Representative Kelly Cassidy answers questions on cannabis in Illinois and the Adult Use legislation she’s sponsored with Senator Heather Steans.

Joining students in attendance were Chicago-Kent alumni entering the cannabis field, Loyola’s SSDP and SMART leaders, Chicago NORML, Greenhouse dispensaries, Grassroots Cannabis cultivation, MOCA dispensary, and Chicagoans simply interested in learning about Illinois cannabis.

Delicious food generously provided by The Pasta Bowl.

Chicago-Kent’s Cannabis Law Society officers Sam Kramer, Jake Ziering, and Jack Shadid joined by Illinois State Rep. Kelly Cassidy.

 

New Cannabis Law Society Secretary, Jack Shadid

Chicago-Kent’s Cannabis Law Society has appointed a new Secretary to carry out the leadership position until the next election, 4/20/2019.

The organization’s President, Samantha Kramer, says of the appointment: “Jack Shadid has been proactive in the success of this organization since it began–we knew he needed a leadership title to reflect his hands-on role. Jack’s experience in the governmental network and processes behind cannabis legalization make him a great candidate. Mostly, though, his drive to help pioneer a new emerging legal scene makes Jack an excellent fit among our co-founders as we build a strong foundation for this organization to grow upon.”

Cannabis News: Acreage Holdings Medical Cannabis Super Bowl Commercial Rejected by CBS

Acreage Holdings was ready and willing to pay CBS the millions it costs to run a 60-second Super Bowl ad.  Following standard procedure, they sent the network a bid on an advertisement for a medical treatment that depicted three patients sharing how their lives have been changed for the better with this medicine.  The only problem?  The medicine is cannabis and CBS has taken the stance that promoting medicinal cannabis, legal as it may be in many parts of the country, is not something they will consider doing at this time.  According to USA Today (January 22, 2019), a CBS spokesperson stated that cannabis ads are not within the company’s current broadcast standards and they will not be accepting any bids for cannabis ads for the big game next Sunday.  This strikeout comes at a time when many cannabis activists continue lobbying efforts nation-wide and as an increasing number of states decriminalize pot and even make it legal for recreational use.

Could this rejection of a medical ad be a setback for the cannabis community at large in its labors to normalize legal pot use?  Only time, and legislation, will tell.

Watch the commercial.

Read the full story.

Post by Courtney Prado of The Cannabis Law Society.

Faculty Advisor Dina Rollman Named One of Illinois’ Top 10 Cannabis Influencers

Chicago is rich with rising cannabis stars from social activists to CEOs. The Cannabis Law Society’s faculty adviser made the list of the 10 most influential people in Illinois cannabis 2018 for her role as Green Thumb Industries (Ticker: GTI) Chief Compliance Counsel and President/Founder of Illinois Women in Cannabis. You can look forward to hearing her speak at our 2019 events! Along with a handful of others who ranked on this list.

Read the full Chicago Sun-Times article here: Continue reading “Faculty Advisor Dina Rollman Named One of Illinois’ Top 10 Cannabis Influencers”

Illinois “Cannabis King” is Chicago-Kent Grad

Did you know Joseph Wright, Chicago-Kent Class of 2013, was the first director of the State of Illinois Medical Cannabis Pilot Program?

Learn more in his IllinoisTech Magazine profile:

Juris Cannabis
by Koren Wetmore

Continue reading “Illinois “Cannabis King” is Chicago-Kent Grad”