By Kelly Knepper-Stephens
Providing legal counsel to a California marijuana dispensary is a tricky business given the existing conflict between state and federal law.[1] The issues facing the marijuana industry require the same type of legal advice any business seeks: corporate law issues such as incorporation or partnership formation, contract law issues such as leases and purchase agreements, employment law issues, as well as criminal law considerations, to name a few.[2] Can an attorney ethically provide any of this needed advice, when the conduct of the business is illegal under federal law?
None of the applicable California rules are clear on the ethical question. First, California Rule of Professional Conduct 3-210 prohibits members from advising clients to violate any law, rule, or court ruling. Second, Business & Professions Code § 6068(a) creates a duty for attorneys to “support the Constitution and laws of the United States and of this state.” Finally, Business & Professions Code § 6106 mandates disbarment or suspension to any attorney who, in either the course of work or otherwise, commits any act “involving moral turpitude, dishonesty, or corruption.”
The Bar Associations of San Francisco and Los Angeles issued advisory ethics opinions endorsing the ability of an attorney to advise and assist a medical marijuana dispensary concerning the cultivation, distribution, and consumption of marijuana under state law. Both opinions – (San Francisco Opinion 2015-1 and Los Angeles Opinion 527) – rely upon the long-standing policy that attorneys should be available to assist those in need of legal counsel. As the Los Angeles Opinion states, “[i]t would be a strange result indeed, if a client who wants to avoid committing a crime under California law cannot receive assistance from a lawyer.”
However, these opinions explain that an attorney cannot advise or assist a dispensary to violate the federal law. Instead, an attorney must explain federal law violations and consequences to the client. Additionally, the San Francisco Opinion cautions that by simply giving the advice an attorney may aid and abet violations of the federal law. Therefore, an attorney must advise clients regarding the potential limitations on confidentiality, such as the crime fraud exception to attorney client privilege and any applicable exception to client confidentiality listed in Business & Professions Code § 6068(e)(2).
The Board of Trustees of the State Bar of California has proposed amendments to the California Rules of Professional Conduct that would permit an attorney to provide advice and assistance concerning a California law that conflicts with federal law as long as advice is also provided regarding the federal law. See Comment 6 to Proposed Rule 1.2.1, Advising or Assisting the Violation of Law.
On March 30, 2017 the State Bar submitted these proposed rules to the California Supreme Court for approval. Two weeks ago, on April 11, 2018, in Administrative Order S240991 the Court proposed revisions to the proposed rule, including Comment 6. The proposed revisions allow an attorney to advise and assist in “drafting, administering or complying” with California law and implementing regulations, but obligate the attorney to inform the client of the conflicting federal law and, and if circumstances warrant, advise about the conflict.
These new rules do not take effect until they are approved by the Court. On May 8, 2018, the Board will consider the Court’s proposed amendments and whether the changes require additional public comment. If the Board approves the changes, it can simply submit the modifications for the Court’s approval. For those representing marijuana businesses, the sooner this rule is passed the better.
Kelly Knepper-Stephens is General Counsel & Chief Compliance Officer with Stoneleigh Recovery Associates, LLC.
[1] See 21 U.S.C. § 841 (making it a crime to grow, sell or possess marijuana); compare Cal. Bus. & Prof. Code 26000 et seq., Cal. Health & Saf. Code 11000 et seq., 11357 et seq., 11362.7 et seq.
[2] While these issues have existed since the state legalized medical marijuana, they persist, with greater intensity, in light of two events: (1) the recent passage of Proposition 64 legalizing marijuana and (2) the January 2018 Department of Justice Memo on Marijuana Enforcement announced a return to the “rule of law” viewed as a departure from the previous administration’s marijuana policy.
This article was originally published in the SDCBA’s “Ethics in Brief” column series.
No portion of this summary is intended to constitute legal advice. Be sure to perform independent research and analysis. Any views expressed are those of the author only and not of the SDCBA or its Legal Ethics Committee.