Haze of med marijuana regs creates new work for lawyers

By Claire Bushey, Crain News Service

CHICAGO (Feb. 20, 2015) — The haze of regulation surrounding Illinois' new medical marijuana law will help at least one profession: lawyers.

With the market for medical marijuana in Illinois predicted to reach $36 million in 2016, there is a growing need for legal advice, according to Dina Rollman, a partner at Chicago-based litigation boutique Sperling & Slater who has developed a separate cannabis practice. Ms. Rollman advises Green Thumb Industries, which received licenses this month to open three cultivation centers and one dispensary.

Individual attorneys have led the push to serve clients in the emerging industry, she said, and as demand increases, “we will see. . .growing involvement with a lot of full-service firms.”

Some lawyers and firms have hung back, concerned that working with cannabis businesses could hurt their reputation or create client conflicts. Others have decided to pursue the business, which extends beyond regulatory work to include standard business operations: drafting third-party contracts, preparing leases for real estate and protecting intellectual property.

There was “an avalanche” of interest from lawyers starting the day after Illinois Gov. Pat Quinn signed the law in 2013, said Dan Linn, executive director of the Illinois chapter of the National Organization for the Reform of Marijuana Laws (NORML). He decided to co-found Chicago-based Midwest Cannabis Consulting after a lawyer quizzed him about the law, then refused to make a donation to NORML.

“I knew they were going to turn around and bill their client for the conversation they had with me, and I couldn't even get a donation,” he said. Cannabis growers and dispensaries may not see a return on their investment before the pilot program expires in 2018, he said, but “at least in the short term, the lawyers are going to get paid.”

Chicago-based Arnstein & Lehr made a strategic decision to pursue clients in the cannabis industry, Managing Partner Michael Gesas said. The idea developed among senior management because the area dovetailed neatly with the firm's key practice areas in lending and health care.

Bank contacts

Bankers leery of violating federal law often refuse to deal with cultivators and dispensaries, so businesses frequently operate using cash. Lawyers at Arnstein thought they could connect cannabis businesses to private lenders and local banks that already were clients of Arnstein's. Cannabis clients would need specialized tax and employment advice, too — advice that small law firms and solo practitioners might not be able to provide.

“It all just seemed to fit into a package,” Mr. Gesas said. Not only will Arnstein serve clients directly, “we're hoping to be able to service some of the smaller (law) firms.”

Arnstein consulted partners, clients and outside counsel before pursuing clients whose businesses still are illegal under federal law. In October, the Illinois State Bar Association recommended revising the state's code of professional conduct to protect lawyers who made a good-faith effort to help clients comply with Illinois law, despite the conflict.

But Brian Rosenblatt, a partner at SmithAmundsen in Chicago who is adding a cannabis practice to his work in entertainment law and commercial litigation, said that without case law, there is no way to know how the Illinois Supreme Court — which ultimately regulates the state's lawyers — will view a situation where an attorney assists a client in an action that is legal in Illinois but potentially violates federal law.

“You could teach a semester-long law school class on the ethics of that issue alone,” he said.

That's why cannabis still frightens many attorneys, particularly at big firms, said Hilary Bricken, a partner at Canna Law Group, a practice group at Seattle-based Harris Moure. The firm opened an office in Chicago in 2012. Another out-of-state firm specializing in marijuana law, Vicente Sederberg of Denver, includes attorney Alexa Tetzlaff, daughter of former McPier Chairman Ted Tetzlaff. She is representing a dispensary in Garfield Ridge.

But large firms' standoffishness appears to be slowly changing. An April conference on medical marijuana in Illinois will include speakers from Locke Lord Edwards, Clark Hill and Thompson Coburn. The conference's co-chair is Eric Berlin, a partner at Jones Day in Chicago who said he has donated about $300,000 in pro bono hours lobbying to pass the medical marijuana law. Now that it's on the books, he has worked with clients who applied for permits, as well as counseled other companies on the implications for employment and health care.

“Because the act that passed was so full of regulation and complicated, it was a natural step that lawyers would get involved,” Mr. Berlin said.

This report appeared on the website of Crain's Chicago Business magazine, a sister publication of Tire Business.