Welcome to Higher Law, our new weekly briefing about all things cannabis. I’m Cheryl Miller, reporting for Law.com from Sacramento. Check out what cannabis lawyers tell me about vetting prospective clients who are coming out of the shadows and into the regulated market. Scroll down for more on how marijuana practices are expanding in California. Plus: First-quarter federal lobbying disclosures reveal some of the new marijuana advocacy happening in Washington. Thanks for reading—and I love your feedback. Drop me a line at firstname.lastname@example.org or call me at 916-448-2935. I’m also tweeting @CapitalAccounts.
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Asking the Right Questions: What Do You Say?
Everyone wants a piece of the Green Rush. But what’s a lawyer to do with a potential client who’s accustomed to working in marijuana’s shadows, where agreements and ownership rights perhaps were not always cemented in formal documents?
I reached out recently to three lawyers in the cannabis space who told us how they approach those initial conservations with would-be clients. Those responses are below. I’m also interested in what you’re hearing and seeing—so shoot me a note at email@example.com.
➤➤ Katy Young, partner, Ad Astra Law Group, San Francisco
I only handle disputes, and filing lawsuits to resolve cannabis business disputes is still a fairly new phenomenon that the judiciary is not yet entirely used to, especially if your dispute would be filed in a conservative judicial district.
So I ask “What is your appetite for filing a lawsuit, and if you want to go that route, how comfortable are you with being a guinea pig for this kind of matter?”
I handle mostly partnership disputes and breach of contract actions. I see the same kind of opponent in nearly every conflict, so I ask “Would you describe the opponent as someone who considers him/herself to be the smartest person in any room?”
And the most common, a real classic in this industry, “Is any of what you are saying written down anywhere?” Otherwise it is just he said/she said.
➤➤ Dean Richardson, partner and trial section vice-chair, Moye White, in Denver
The first question in every representation is “How can we help you?”
Do you have an operating agreement, and what is the management structure of the company (it is manager-managed or member-managed)?
Who are the owners of the company and are there any disputes among owners?
Is there an arbitration agreement?
➤➤ Jason Klein, partner, Offit Kurman, Washington, D.C.
What are your true motivating factors? Is it success, reputation, fear, acclaim, policy change or something else?
Are you focused on getting any project done or the right project done?
What steps have you taken in your personal or professional life to prepare for this project?
The California Boon for Cannabis Practices
California continues to be a magnet for firms looking for a share of the business generated by the state’s newly regulated adult-use marijuana market.
My colleague Xiumei Dong in San Francisco takes the pulse from Ariel Clarkand Nicole Howell Neubert about the expansion of four-year-old Clark Neubert into the capital city of Sacramento and surfing mecca, pot friendly Santa Cruz. (That photo above—that’s the Breakwater Lighthouse in Santa Cruz.)
The firm already has offices in San Francisco and Los Angeles, and its lawyers hold office hours in the Emerald Triangle’s Humboldt County.
As cannabis businesses develop, Neubert said, “they take on financing and investments. And as they move into being regulated, where they can operate for-profit businesses, they really need to have good, sophisticated, corporate and transactional advice. That’s a big part of our expansion.”
Greenspoon Marder also recently expanded in California, this time with a Los Angeles office staffed by a group of lawyers from Eisner Jaffe, according to ALM’s Meghan Tribe. While the L.A. office won’t necessarily focus on cannabis work—the alcoholic beverage and entertainment industries will be central—Greenspoon Marder has a large multi-city marijuana practice.
The firm opened its San Diego office in 2016 shortly before California voters approved recreational marijuana. Greenspoon Marder also handles cannabis work in Nevada City, a small town surrounded by a large growing region in the Sierra Nevada foothills.
Who Got the Work
The first quarter federal lobbying reports are in, and while marijuana policy advocacy remains a specialized, limited field, a few filings stand out.
➤➤ Canndescent, the Santa Barbara, Calif.-based grower of “ultra-premium cannabis flower,” spent $90,000 to lobby on patent and trademark issues as well as approval for new marijuana research facilities. D.C. firm Federal Advocates Inc. was on the lobbying registration.
➤➤ The New Federalism Fund, a 501(c)(4) group backed by large cannabis companies in marijuana-legal states, spent $110,000 on lobbying services from Brownstein Hyatt Farber Schreck. Among the group’s top lobbying issues were taxation of cannabis businesses and banking policies.
➤➤ The National Cannabis Industry Association spent $140,000 lobbying in the first quarter with its own team of in-house advocates as well as help from Federal Advocates. The leading national trade group worked on an array of issues, including provisions in the appropriations bill, taxes paid by cannabis businesses and protections for marijuana-legal states.
In the Weeds
• Millions for a legal fight. The Ohio Department of Commerce has allocated $2 million for legal costs to defend the state’s medical marijuana licensing process. Ohio is already facing three lawsuits challenging how it scored and awarded 24 cultivators licenses. The state has retained Squire Patton Boggsas special counsel. [cleveland.com]
• Legal marijuana’s big moment. The year started with U.S. Attorney General Jeff Sessions rescinding the Cole memo. Now, U.S. Senate Majority Leader Mitch McConnell is promoting hemp, former House Speaker John Boehner is pitching legal pot and President Trump says he won’t go after state-legal marijuana. “It’s kind of exciting, isn’t it?” Oregon Rep. Earl Blumenauer told Politico. “It’s all cresting this year … I think we’re entering into the final stages, if everyone does their jobs right.” [Politico]
• Pennsylvania’s medical marijuana program lives on. Commonwealth Court Judge Michael Wojcik rejected Keystone Releaf LLC’s challenge to the way the state scored and ranked applicants for medical marijuana dispensary licenses. “It’s a ‘Thank God’ moment,” Justin Moriconi, a Moriconi Flowerspartner who represents several license recipients, told The Philadelphia Inquirer. [Philly.com]
• Marijuana insurers welcome in California. State Insurance Commissioner Dave Jones wrote a public letter to insurers, telling them President Trump’s recent assurances to Colorado Sen. Cory Gardner that he would protect state-legal marijuana operations “should further reduce the risk” of underwriting cannabis companies. Just one admitted insurer, Golden Bear Insurance Co., officers policies to those in California’s cannabis industry. [Property Casualty 360]
• How an African American marijuana grower is mastering california’s green rush. Meet Bryant Mitchell of Blaqstar Farms in East Los Angeles. “A twist on the industry of black celebrities endorsing white-owned cannabis brands, Mitchell, a Texas native, is the rare black grower operating at this size and in the light of adult-use legal scrutiny.” [Fast Company]
• The Cannabis state of the union. In case you missed it on 4/20, Rep. Blumenauer offered his analysis of pot’s current standing in America. Spoiler alert: the Portland Democrat is [cautiously] optimistic. [@repblumenauer]