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Cannabis Litigation Update – February 2022

February 08, 2022

Federal Illegality of Cannabis and Lawyers’ Right to Practice Cannabis Law

It is a truism that lawyers should not advise their clients to begin or continue illegal activity. Such actions are prohibited by Model Rule of Professional Conduct 1.2(d): “A lawyer shall not counsel a client to engage, or assist a client, in conduct that the lawyer knows is criminal or fraudulent . . . .” Model Rules of Prof’l Conduct r. 1.2(d) (2020). This concept becomes less straightforward, however, when it comes to the murky legal status of cannabis, a topic recently commented on by Justice Clarence Thomas and which has been the subject of several recent state bar ethics rulings and opinions.

I.     Justice Clarence Thomas’s Recent Statement

In a June 28, 2021 denial of certiorari in Standing Akimbo, LLC v. United States, 141 S. Ct. 2236 (2021), Justice Thomas made a point of describing United States cannabis policy as “a contradictory and unstable state of affairs that conceals traps for the unwary.” Id. at 2237. He also noted the strain on federalism caused by cannabis’ federal illegality, writing,

[i]f the Government is now content to allow States to act “as laboratories” “‘and try novel social and economic experiments,’” [citation] then it might no longer have authority to intrude on “[t]he States’ core police powers . . . to define criminal law and to protect the health, safety, and welfare of their citizens.” [citation] A prohibition on intrastate use or cultivation of marijuana may no longer be necessary or proper to support the Federal Government’s piecemeal approach.

Id. at 2238. This statement was a landmark in the legality debate over cannabis, as it is rare for a Supreme Court Justice call out cannabis’s inconsistent legal status, particularly in a denial of certiorari. This inconsistency is also being addressed by state bar ethics committees, as many are deciding whether to amend Rule 1.2(d) to allow lawyers to advise clients on cannabis-related matters despite the fact that cannabis remains illegal federally.

II.     New Regulations in New York and Montana

Both New York and Montana have addressed Rule 1.2(d) by permitting attorneys to counsel cannabis businesses. While the New York State Bar Association Committee on Professional Ethics previously opined Rule 1.2(d) allowed lawyers to advise clients on medicinal cannabis in 2014, the recent legalization of recreational cannabis posed an important question: Can the state operate its complex recreational cannabis regulatory system without the help of lawyers (i.e. if Rule 1.2(d) is enforced for recreational cannabis)? The Committee agreed the answer is no, stating, “the need for lawyer assistance to clients to assure compliance with state regulatory requirements in the medical marijuana industry, which justifies continued federal forbearance, applies with equal if not more force to recreational marijuana.” N.Y. State Bar Ass’n, Comm. on Prof’l Ethics, Op. 1225 ¶ 17 (July 8, 2021). Indeed, “[w]ithout the aid of lawyers, the recreational marijuana regulatory system would. . . likely break down or grind to a halt.” Id. Further, the Committee opined that lawyers can accept equity interests in cannabis businesses in exchange for legal services, so long as the lawyers comply with other ethical rules addressing conflicts of interest and business transactions with clients. Id. ¶¶ 28-30. Montana also came to a similar conclusion on Rule 1.2(d) and inserted a clause into its Rules of Professional Conduct stating, “a lawyer may counsel and assist a client regarding Montana’s cannabis-related laws. In the event Montana law conflicts with federal or tribal law, the lawyer shall also advise the client regarding related federal and tribal law and policy.” Montana Rules of Prof’l Conduct Preamble § (6) (2020).

III.       New Prohibitions in Georgia and South Dakota

Georgia and South Dakota, however, have taken a different approach. Since April 16, 2015, medicinal cannabis has been permitted in some form in the state of Georgia. E.g. Ga. Code Ann. §§ 16-12-190 to -19, 31-2A-18, 31-50-1 to -5 (2021); 2015 Ga. Laws. 49-59. Nevertheless, whether lawyers can assist with this highly regulated industry was not addressed until June 21, 2021, when the Georgia Supreme Court denied a motion by the Georgia State Bar Association to edit Rule 1.2(d). In re: Motion to Amend 2021-3, 1 (Ga. June 21, 2021), The decision is best summarized by its last few lines, which state, “this Court has long prohibited Georgia lawyers from counseling and assisting clients in the commission of criminal acts.” Id. 1-2. “The passage of a Georgia Statute purporting to permit and regulate conduct that constitutes federal crimes does not change that long-standing principle.” Id. at 2. Similarly, the State Bar of South Dakota’s Ethics Committee recently opined that South Dakota lawyers may not “ethically counsel, advise, provide legal services to, or represent a marijuana cultivator, processor, or seller.” State Bar of South Dakota Ethics Comm., Ethics Op. 2020-07 (2020). The Committee reasoned that “Rule 1.2(d) does not distinguish between client conduct that is illegal under South Dakota law and client conduct that is illegal only under federal law. It applies to any conduct.” Id. Therefore, any legal advice must be limited to (1) addressing “the legal consequences” of running such a business “under either state or federal law” or (2) assisting such businesses “determine the validity, scope, meaning, or application of the relevant state and federal law.” Id.

IV.       Conclusion

As cannabis continues to be legalized both recreationally and medicinally in more states and the demand for legal services for cannabis businesses grows, we expect to see more disparate opinions on Rule 1.2(d) as it relates to cannabis.