SMOKE: Employees of The Joint, a medical marijuana cooperative in Seattle, tend to patients.
SMOKE: Employees of The Joint, a medical marijuana cooperative in Seattle, tend to patients. (AP / Ted S. Warren, File)

In 2011, Khurshid Khoja, a California lawyer who worked with a wind-energy company, spotted opportunity in another type of green.

Reed Smith, where he worked as an associate, could assist the budding cannabis industry, Khoja told firm partners and firm leaders. That Nov­ember, Khoja hosted the ArcView Group, a collection of cannabis industry investors, for an inaugural session at Reed Smith’s San Francisco office. Khoja slipped out for a chat with the office managing partner. When he returned, he leaned to ArcView CEO Troy Dayton and said, “I’m pretty sure I just got fired.”

Dayton tells this story to hundreds of investors and entrepreneurs at cannabis industry conferences, as evidence of their irreverent history and how far the industry has come. Three years feels like a generation ago to the cannabis industry — and to the lawyers working with it. Since then, seven states have joined 16 others and the District of Columbia in allowing medical marijuana, and two states, Washington and Colorado, voted in 2012 to legalize it for personal use. [ See map.]

At least six small law firms in Colo­rado, California, Florida and Washington state have reorganized themselves around the industry. National firms like Akerman and Pillsbury Winthrop Shaw Pittman have jockeyed to do business with the industry. Many firms, with clients prodding them for help, are in early stages of deciding upon what to do. Yet other large firms, especially those that work with federal agencies that prohibit the drug, won’t work with the industry.


“It’s not like we’re out there trying to shake the stalks and scoop up the buds as they hit the ground,” Jay Gould, Pillsbury’s investment funds and management practice leader, said. “As we’re faced with opportunities, if it makes sense, we’ll do it.” The firm works with clients that could touch on the industry, such as investment funds, he said.

Michael Wu, a San Francisco corporate and securities counsel to Pillsbury, explained his firm’s support in an email last month to the California Cannabis Industry Association, according to an email obtained by The National Law Journal.

“I’m hoping that people will think of Pillsbury as one of the first major law firms to be supportive of the cannabis industry, including its investors and entrepreneurs,” Wu wrote, according to the email. Pillsbury also hosted a conference in San Francisco in July to inform financiers and business developers about laws involving cannabis.

A Reed Smith spokesperson said the firm does not have a policy on working with the marijuana industry. (The firm declined to comment on personnel matters when asked about Khoja.)

At the Washington office of Milwaukee-based Quarles & Brady, office managing partner Larry Cote said he has talked about the marijuana industry with his colleagues. Some are former U.S. Drug Enforcement Administration attorneys, and the firm advises pharmaceutical companies on the regulations of restricted drugs.

“Like anyone else, we get inquiries periodically on various issues related to marijuana,” Cote, himself a former DEA counsel, said. But he and his partners are in agreement: Their relationship with the DEA is too valuable to antagonize.

At the same time, the marijuana business isn’t valuable enough yet.

No player exists in this industry — not as a grower or distributor, nor as an ancillary technology, consulting or accessories provider — with more than $50 million in annual business. Niche cannabis attorneys say they bill at around $400 an hour.

Still, the industry is expanding at an annual rate of almost 70 percent per year with a potential market in the billions, Dayton, the investment CEO, said.

In this November’s elections, two states, Alaska and Oregon, will vote on a referendum to legalize marijuana for personal use. Floridians will vote on a constitutional amendment to expand medical-marijuana use. That initiative has 88 percent support, according to a Quinnipiac University poll in July.

Florida is the next hotbed for business, according to Hilary Bricken, a corporate and litigation attorney at Seattle-based Harris Moure. She and her branded practice, Canna Law Group, work with cannabis clients nationally.

“Florida has the benefit of coming after all of these other cannabis states on the West Coast,” she said. “I think they see tax revenue written all over it. It’s a baby boomer and tourism state.”

Akerman, with strong roots in Florida, at first wasn’t certain if it wanted to work with the industry.

A client approached D.C. office managing partner Richard Spees, the government-affairs group chairman, and he asked the firm’s executive committee to vet the work. They approved, and in May the firm established a cross-practice “regulated substances task force.”

Clients sign a retainer letter that acknowledges the drug is prohibited under federal law, yet that they will still pay federal income taxes, Spees said. So far, the scent of business has drawn other regional firms into action.

Florida firms Berger Singerman and GrayRobinson both have set up groups to work on the issue.As the cannabis industry matures, it could expand in directions that push those mid-sized players out.

Right now, cannabis is an industry in version 2.0: Startups led by savvy entrepreneurs are replacing lifelong growers or mom-and-pop shops. If legalized in more states or nationally, marijuana businesses could consolidate into their own force or as part of an existing industry group.

Pharmaceutical companies could be attracted, as could Big Tobacco, long rumored to eye marijuana as both kin and enemy, or the alcohol industry, which has served as a template for the cannabis industry in multiple states.

“I’m certainly watching my back for competition,” Khoja said. “Once the big money comes in, they tend to gravitate to the big institutional firms.”