When debating whether to take on a new client in the medical cannabis industry, there are two questions that should immediately come to any attorney’s mind:
Is it legal?
Is it ethical?
A June 2015 ethics opinion from the Bar Association of San Francisco (Opinion 2015-1) answers both questions in a way that most lawyers are familiar with: yes and no. But ultimately, the opinion takes the position that representation is ethical if:
The lawyer properly apprises herself and her clients of the risks associated with the cannabis industry, including the possibility of federal prosecution.
The lawyer advises clients to adhere to state regulation
The lawyer discourages conduct and behavior that would invite federal prosecution.
Specifically, the opinion addresses the question of whether a lawyer may represent a client in forming and operating a medical marijuana business (that would be lawful under California state law) by assisting with lease negotiation and obtaining financing, a use permit, and a business license for the client.
Federal Legal Liability Still Exists
The opinion reiterates what most of us already know: cannabis, medical or otherwise, continues to be a Schedule 1 substance publishable by significant jail time on a federal level. For the client, this means that minimum sentencing guidelines could require five years to life in prison, depending on volumes of cannabis processed and sold. Of course, aiding and abetting liability exists as well, which could subject the lawyer itself to penalties that are analogous to those imposed on the principal violator.
While the DOJ has clearly stated that its priorities for enforcement against those that are in "clear and unambiguous compliance" with state law, enforcement continues to be discretionary, as those as Harborside Dispensary will surely tell you.
Why Federal Law Doesn’t Preempt California Law
Under preemption doctrine, a state law may continue to remain in force as long as it does not positively conflict with a federal law. Therefore, California may continue to regulate the medical use of marijuana in its own state as long as those laws and the regulatory scheme do not positively conflict with the Controlled Substances Act.
Under California's Compassionate Use Act of 1996, a person that obtains a written recommendation from a physician to engage in the use of medical marijuana to treat a serious condition is not subject to otherwise applicable state laws prohibiting the use of marijuana. And through various other laws, the cultivation and distribution of marijuana for medical use is similarly exempted from otherwise applicable state laws that criminalize operation in the cannabis industry.
Since California state law does not "legalize" medical marijuana, and instead simply exercises the state's power to not enforce certain violations of state criminal law against those that provide cannabis to treat serious medical conditions, state law cannot be struck down as contrary to federal law. Of course, state law also does not prohibit enforcement of federal drug laws, which allows both to coexist without the direct conflict that would invalidate California state law.
Ethics of Advising State-Legal and Federally-Illegal Conduct
The ethics opinion takes the position that a lawyer may advise, assist and represent a client with regard to state law, while, at the same time, counseling against conduct that would invite federal prosecution. Indeed, those that wish to engage in the legal cultivation and sale of marijuana may be some of those most in need of counsel to explain the specific rights, duties and obligation related to this highly specialized and unique industry. And attorneys have a corresponding obligation to provide legal services to those that need them. In other words, the opinion takes the position that a lawyer can and should advise a client on how to comply with state law, which does not equate to advising the client on how to violate federal law.
The opinion states that, in order to fulfill their ethical requirements, the attorney would be required to:
Inform their client of obligations under state law.
Counsel the client to avoid state law violations.
Asset the client only in matters that conform to state law.
Inform and warn the client of the risks associated with the business under federal law, including the risk of prosecution and imprisonment.
Advise the client on how to minimize the risk of federal prosecution in accordance with the Cole Memorandum and other considerations described in the ethics option.
Warn the client that, if it engages in violations of California law, or in a manner that invites federal prosecution, the lawyer may withdraw from representation.
Advise the client on limitations of confidentiality. The crime-fraud exception to lawyer-client privilege applies if the lawyer’s services are enlisted to plan or commit a crime. While the intent to commit a crime itself remains privileged, if the client seeks advice or assistance in committing or planning to commit a crime, the privilege falls away. This could expose conversations that would normally be subject to the attorney client privilege to adverse parties in litigation, including to the prosecution.
Additionally, the lawyer should be aware that, if it finds out that the client has engaged in violations of state law, the lawyer is permitted to withdraw, but is not required to do so.
The allowance for ethical representation of cannabis clients reflects practical considerations in the legal and cannabis industries. The alternative would be to require potential clients to wait until they are criminally charged or named in a forfeiture action to obtain the legal advice that could have prevented the action in the first place. A lawyer’s responsibility extends beyond the zealous representation of one's clients at trial and includes the obligation to provide preventative legal services to those in need.
Broader Implications for Other States
For those of us that practice in states other than California, it is important to note that California does not follow the Model Rules when examining the extent to which an attorney must avoid advising clients on matters that may be illegal on a local, state or federal level. Model Rule 1.2(d) states that "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 layer 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."
States that have implemented versions of this model rule and examined the outcome in similar situations have rendered inconsistent results.
States that would ethically prohibit advising a client on issues that are legal under state law but illegally federally include both Maine (Me. Prof’l Ethics Comm., Op. #199 (2010)) and Connecticut (Con. Prof’l Ethics Comm., Informal Op. 2013-02 (2013)).
On the other hand, states that would allow a lawyer to provide legal assistance to a potential client include:
Arizona (Ariz. Ethics Comm. Op. 11-01 (2011)).
Colorado (Colo. Ethics Comm. Formal Op. 125 (2013) and Comment 4 to Model Rule 1.2(d)).
New York (N.Y. Comm. On Prof’l Ethics Op. 1024 (2014)).
Washington (King County Bar Association Ethics Advisory Op. (Oct. 2013) (opinion on I-502 and rules of professional conduct) and Wash. State Bar Ass’n, Comm. on Prof’l Ethics Proposed Advisory Op. 2232 (2014)).
Additionally, other states have passed statutes or enacted policies that protect lawyers in their representation of clients operating in the cannabis industry, including: