Canna Law Blog

Canna Law Blog


Marijuana Company Director Liability

Posted in Business Basics, Legal Issues

Congratulations! You are a director and minority shareholder of a corporation that has a shiny new license to sell marijuana. You have hired the talent. Your company’s CEO and CFO are on the job. You, your other shareholders, and your lenders have paid for your retail Taj Mahal, and now you can go to the beach and laugh while watching your bank account explode. So this is what they meant by passive income.

Not exactly.

Corporate director liability was a hot topic in the mid 2000s with Enron and Worldcom directors ponying up tens of millions of dollars in personal assets to pay huge settlements to shareholders. Most observers paid attention to the risks for outside (non-officer) directors in mega-companies, but many of those same lessons apply with nearly equal force to mom and pop corporations with only a handful of shareholders.

Directors of companies, no matter the size of the company, still owe fiduciary duties to their corporations. As a fiduciary, a director’s primary duty is to the corporation, and personal interests are subordinate to that duty. Fiduciary duties are generally split up into two categories: duty of loyalty and duty of care, though they can be further dissected into a lot of different categories (duty of fair dealing, duty of good faith, etc.).

The duty of loyalty is something that is generally understood by even corporate novices. If you are a director of the company, you cannot enter into transactions that present a conflict of interest without disclosure and acceptance by the other directors. Say that your company has developed a new, more efficient method of processing a marijuana concentrate. If a director turns around and sells that technology to a competitor for personal gain, there is an issue, and the shareholders can sue that director and win. Not too controversial. What if a director buys a small ownership stake in another marijuana company with its own top grade marijuana concentrate? What if a director buys a large ownership stake in another marijuana company with its own top grade marijuana concentrate? These are tricky questions, the answers to which typically require analyzing all of the facts and applicable law.

The duty of good care is trickier to wrap one’s head around. As a director, it would be nice to do nothing but show up to the annual meeting, cast a vote in favor of the officers, and go back to your margarita-induced perpetual state of relaxation. However, you expose yourself to shareholder liability if you do not do more. You need to do something like the following types of diligence before taking any votes:

  • Obtain and consider all relevant information
  • Take time to evaluate corporate actions
  • Consider the advice of experts
  • Understand the terms of the transaction
  • Understand the corporation’s financial statements and monitor related financial controls
  • Review and monitor the performance of the CEO and other senior officers
  • Implement and monitor systems to check for failures to comply with laws and regulations

Though the above sounds like a lot of work it really just comes down to the director staying informed about the health and compliance of the company while also being knowledgeable about the company’s finances.

If these duties are owed to the company, who sues if there is a breach? Individual shareholders do. In the closely held corporation, the other shareholders are often friends, family, and long-time business associates. When a company begins to falter, shareholder litigation is often a next step. You may think that your friends and close business associates will never sue you, but if that were true, there would not be lawyers out there who do nothing but take on this sort of lawsuit.

Bottom Line:  If you are going to be a director of a cannabis company, you should first make sure that the company has insurance in place to cover your director liability and you should take your duties seriously.

Cannabis Business Forum. Spokane, Washington, April 16.

Posted in Events, Washington

Wednesday, April 16, at 7 p.m. The Inlander will be putting on a “CannaBiz Forum” at the Bing Crosby Theater, at 901 W. Sprague Ave. in Downtown Spokane. The forum will address what I-502 means for Washington State and in particular, for Washington, East of the mountains.

Canna Law Blog’s own Hilary Bricken will be one of three panelists discussing the issues, along with Matt Cohen and, CEO of TriQ Systems and Randy Simmons, deputy director of the Washington State Liquor Control Board. The Inlander describes the panelists as follows:

Matt Cohen

Matt Cohen

A pioneer in the medical cannabis movement, Cohen spent more than a decade as a medical marijuana grower in California’s Mendocino County. Despite working within county and state law, Cohen’s farm was raided by armed federal agents in 2011 – an event documented by PBS’s Frontline. Cohen was also featured in Doug Fine’s 2012 book, Too High To Fail. Cohen served as the expert on production issues for the Washington State Liquor Control Board as it wrote regulations to enact I-502. Today he is the founder & CEO of TriQ Systems, a software, equipment & supply company; he is currently consulting for clients in Washington.

Randal Simmons

Randy Simmons

Named the “ganja guru” by the Seattle Times for his depth of knowledge, Simmons spent 23 years in the private sector before joining the Liquor Control Board in 2002. Since last year, Simmons has been the agency’s deputy director, leading 11 different research teams as the state has grappled with creating – nearly from scratch – a regulated cannabis marketplace that is expected to reach into the hundreds of millions of dollars in annual sales.

Hilary Bricken

Hilary Bricken

For her expertise in the emerging legal field of cannabis regulation compliance, Bricken was named “Marijuana Industry Attorney of the Year” by Dope magazine. Bricken is with the Seattle-based Canna Law Group and has helped Washington state clients navigate the murky legal issues surrounding legal cannabis, from land­ use disputes to intellectual property rights to tax and banking issues. She has also consulted with the Liquor Control Board on I­-502 implementation.

We hope to see you there. UPDATE: Just came across an Inlander article, entitled, Questions for the CannaBiz panel of marijuana experts, setting out the following questions that will be asked by the moderator of the panelists tomorrow — in addition to questions from the audience:
  • Some have said much of Colorado’s success establishing a recreational market has come from the state already having a well-established medical system. Do you think Washington will suffer in that regard because our medical market, especially in Eastern Washington, is more volatile and unregulated?
  •  The Legislature failed to pass medical marijuana reform this year, to the relief of some medical marijuana advocates. Do you think we’ll see medical marijuana reform in Washington in coming years? Do you have ideas for how best to treat the two markets — can they co-exist or should they be integrated?
  • In terms of the price of recreational marijuana, should we expect high costs in the beginning due to novelty and demand? When should we expect that market to stabilize and produce the price of cannabis that will last? What will it take to bring the price to a level low enough to eradicate the black market?
  • What changes do you expect in terms of the cultural identity of marijuana? Will we see traditional “stoner culture” fade away in favor of boutique/craft/artisan businesses?
  • Do you anticipate marijuana tourism being a boon for the state? What will individual cities need to do to become destinations?
  • Drivers from Washington and Colorado have accused Idaho law enforcement of profiling them as potential marijuana smugglers. Should Washingtonians crossing state lines be concerned? Will this difference in laws cause problems with neighboring states?
  • What have we learned so far from Washington and Colorado? What advice would you give to other states or citizens starting the initiative process?

Please come with your own questions as well.


Top Ten Marijuana Industry Red Flags

Posted in Business Basics, Florida, General, Intellectual Property/Branding, Legal Issues, Licensing, Medical Cannabis, Oregon, Recreational Marijuana

We’ve been marijuana business lawyers for a long time now and in multiple states, and being on the front lines of this industry means that we have seen a lot of good and bad actors. In this post, we share the Top Ten Marijuana Industry Red Flags so that you know what to look for to protect yourself as you go forth with your marijuana business:

1. Marijuana real estate agents. It is the rare “marijuana realtor” who can be trusted. Let’s be honest, really successful real estate agents are generally not that interested in having to spend the extra time required to handle cannabis properties. Most of the time, the allegedly “marijuana expert” realtors know little to nothing about the state marijuana laws relevant to using a property for cannabis, let alone the local laws, but this virtually never stops them from claiming that they do. We also see too many cannabis realtors who claim to side with the marijuana business, but whose sole goal is to assist landlords in gouging marijuana tenants for above-premium rates.

In vetting your realtor, be sure he or she knows both the state laws as they relate to real estate and any local land use and zoning regulations. Better yet, consider using your own lawyer for this. For our clients, we like having realtors sign non-disclosure agreements so as to minimize the chances of their exposing our clients’ operations for their own benefit. Just by way of one example: you do not want to clue your realtor in on a great property for marijuana and then have him or her tell your competitors about it.

2. Anyone who claims they’re the “next big thing” in the marijuana industry. The “green rush” has given rise to many people who will do anything to make a dollar. You need to be weary of anyone whose goal is to sell you on his or her ability to make it big in this industry or based on some guarantee that they can get you a license.

We stay away from those who are “overly desperate” to be part of “big marijuana,” and you should too, whether it’s a security company, a marijuana licensing consultant, a software company, or even/especially an investment banker. You know the type: they will promise you everything but get really vague when you ask them to explain how it is that they work their magic. Our favorites are the companies that brag about the number of licenses they were able to secure for companies in the states where the licensing process is completely random. Be on particular guard for these people because they like to charge premium prices even before (actually especially before) the licensing process in their state has even become clear.

3. Holding companies. We know how difficult it is to operate a business when banks and credit unions refuse to take you on as a client. Eventually though, things will change for the better. How do we know this? Because we represent financial institutions that are planning to take on marijuana clients soon. In the meantime though, what we can tell you is that running your cannabis money through a holding company and then using that holding company to get a bank account is a very bad way to go about getting a bank account. (Note that this “idea” is a favorite among the very group of people described in paragraph 2 above).

Using a holding company to set up your bank account will attract the attention of both the bank and federal law enforcement and you could be charged with laundering “drug money” and with violating federal law for lying to a a bank. Do not waste your money (or your freedom) on the holding company.

Be honest with the bank and be patient. Please.

4. Ragged and rampant trade organizations. New marijuana trade organizations are popping up as legalization increases. Problem is that most of these new organizations are inert and unorganized and some are flat out corrupt. Many of these groups have been formed with the primary goal of leeching fees from members without any meaningful action. Don’t get us wrong, trade organizations are amazing tools for policy, progress, and protection. But some of the marijuana trade groups we’ve seen lately are incapable of doing anything but wasting people’s money. The most troublesome ones are those set up by lawyers simply to collect legal fees for bringing class action lawsuits that make no legal sense at all.

You need to vet your trade groups thoroughly. Who is really in charge? What’s the goal? What will you really get for your membership dues? What’s the group’s track record on achieving its goals? How loud will your voice be in the group? If you can’t get these questions answered, you should probably decline that membership invite. We have found the best groups to be the really big ones with a national presence and the small local ones that were formed organically by its marijuana business members to achieve particular and well-defined goals.

5. Publicly traded marijuana companies. We blogged about the issues with these companies in Publicly Traded Cannabis Stocks. Watch OutPublicly Traded Cannabis Stocks. Be Careful Out There and again just last week in Publicly Traded Pot Stocks. Watch Out, but we cannot resist again emphasizing how careful you need to be when contemplating investing in a publicly traded marijuana company. Virtually none of the publicly traded companies are anywhere near to being profitable and it seems like every week the media comes out with a new revelation about the sordid background of a company founder. Be doubly suspect of any publicly traded company that provides licensing consulting.

6. Anyone who doesn’t know what the “Cole memo” is. There are certain things that instantly tell us as cannabis business lawyers that we are dealing with people unfamiliar with this industry, and having no clue about the Cole memo is one of those things. The Cole memo gives critical insight into the federal government’s marijuana enforcement strategies and for someone not to know this is usually quite telling. Even more so if they do not even realize that marijuana is still illegal under federal law. These people usually talk about doing business between states as though the federal government is irrelevant. It isn’t.

7. Marijuana airport seminars, consultants, and “colleges.” We previously wrote about pot colleges in Buyer Beware: Pot College and Canna Consultants and we mention them again because they seem to be proliferating out of control, especially in those states (like Florida) believed to soon go legal. We constantly hear horror stories from people who attend these and we have a hard time respecting any lawyer connected to one. We refuse to speak at any of these because we do not have time to vet them and because we suspect about 90 percent of them are a joke at best.

We spend at least twenty percent of our time with new clients cleaning up the messes these companies were told to create by these colleges and consultants. Having run a pot delivery service in California or having worked at a dispensary in Colorado does not make you an expert in anything or everything related to pot in Florida or in Oregon. Please think twice before hiring an allegedly “expert” consultant or acquiring a “degree” from fill-in-the-blank Marijuana University.

8. Anyone who claims they can get you a “regional trademark.” Your brand is often your company’s most valuable asset and usually the best way to protect your brand is by securing a trademark for it. But because the federal government does not usually allow federal trademarks for marijuana related products, trademarks — which are complicated enough — become more so.

There are two ways to get around this federal prohibition. One is to secure a federal trademark for something other than cannabis, which works well in some circumstances and horribly in others. The other is to secure a state law trademark, which works well in some circumstances and horribly in others.

We leave trademarks to one of our attorneys who has been doing almost nothing but trademark law for more than a decade, but far too many former criminal lawyers (who now call themselves cannabis lawyers) are talking about trademark law without having any clue at all. And lately many of these criminal lawyers are pitching talking about “regional trademarks” and wrongly claiming that a trademark in one state will protect you in other states in the same region. This is just not correct; if you want to be assured of protection in any given state, you should either register for a federal trademark or register for a state trademark in each state that you operate in.

If you want a real trademark (one that will actually work), use a real trademark lawyer. It is that simple.

For more on the importance of protecting your cannabis brand by doing your cannabis trademark correctly check out the following:

9. Criminal defense lawyers turning into business lawyers overnight. Would you have your business lawyer argue your DUI case? Of course not, which is why our law firm does not handle criminal cases. Using a criminal defense lawyer to do your business work is equally absurd. Criminal law and business law have a completely different set of laws and one is done in court (criminal) and the other is done in an office (business).

Good criminal lawyers are still valuable in this industry (unfortunately) but as criminal lawyers, not as newly minted business lawyers who are seeing their bread and butter practice of defending marijuana defendants evaporating. Call a criminal lawyer if you are raided by the feds, but for something like your company formations, your trademarks, your real estate transactions, your employee contracts, or your safety compliance, use a business lawyer.

10. The federal government. The federal government is THE big red flag because despite the progress being made by the states, the Feds loom large as marijuana remains a federal crime. Avoid those who tell you not to worry about federal laws because the Feds are inactive or unwilling to enforce, as this is just flat out wrong. Marijuana remains a Schedule I drug and possessing or selling it is still a federal crime and if you do not comply with all state and local laws, your risk of being raided, arrested, and convicted in a federal court will go way up. It is a mistake for you not to be ever mindful of this.

Maryland Momentum on Marijuana

Posted in General

Two important bills about marijuana use are headed to Maryland Governor Martin O’Malley’s desk after being approved by Maryland’s General Assembly on Monday.

Decriminalization for Using or Possessing Less than Ten Grams of Marijuana

One bill, Senate Bill 364 which would become effective on October 1, 2014, decriminalizes using or possessing less than ten grams of marijuana. Under the bill, an individual would face a maximum $100 civil fine for a first offense of using or possessing less than ten grams of marijuana. Second and third offenses would result in civil fines not exceeding $250 and $500, respectively. The bill stipulates that official records of citations for such offenses would not be open to public inspection.

Senate Bill 364 also reduces or eliminates penalties for medical marijuana use and possession. The bill imposes a maximum penalty of $100 if a court determines an individual’s marijuana use or possession resulted from medical necessity. In addition, individuals can claim affirmative defenses to marijuana use and possession charges if they demonstrate marijuana use in a private setting because of a physician-diagnosed severe and debilitating medical condition and they possessed less than one ounce of marijuana. Caregivers of individuals using or possessing marijuana for such medical purposes can also claim an affirmative defense under the bill.

 Medical Marijuana

 The other bill, House Bill 0881, which would take effect on June 1, 2014, provides the framework under which medical marijuana may be grown, distributed, and sold. The bill creates the Natalie M. LaPrade Medical Marijuana Commission that is responsible for approving academic medical centers’ operations of medical marijuana compassionate use programs. The Commission would also be responsible for registering physicians that can prescribe marijuana to qualifying patients and for issuing qualifying patient or caregiver identification cards.

Importantly, the Commission is authorized under the bill to license up to 15 medical marijuana growers and can license medical marijuana dispensaries. Qualifying patients may obtain medical marijuana from either growers or dispensaries.

If Governor O’Malley signs House Bill 0881 into law, the Commission has until September 15, 2014 to publish implementing regulations. Maryland further tasked the Commission to provide by December 1, 2014 a report detailing studies of medical marijuana taxation and the impact that other states’ medical marijuana laws had on their banking and financial transactions. This study will also detail how federal laws and policies affect such issues.

With these two bills, the Maryland General Assembly has followed several other states’ lead in exploring how to effectively regulate marijuana use and possession. The General Assembly’s focus on decriminalizing the possession and use of less than ten grams of marijuana, as well as efforts to regulate medicinal marijuana use and possession, provide opportunities for Maryland to gain important insights as to such laws effectiveness. Such insights could be critical if Maryland eventually decides to legalize recreational marijuana use and possession like Colorado and Washington State.

Importantly, Governor O’Malley has to first sign the bills into law….



They Said It On Marijuana. Quotable Saturday, Part VII.

Posted in General

Jay Leno — love him or hate him — made countless funny jokes in his career as host of “The Tonight Show,” and at least one of those jokes makes for a memorable marijuana quote:

Forty million Americans smoked marijuana; the only ones who didn’t like it were Judge Ginsberg, Clarence Thomas and Bill Clinton.

We like this quote not only because it is funny, but also because it so nicely encapsulates the hypocrisy of most Americans (and especially high profile officials) when it comes to marijuana. We also like how this quote highlights how the social stigma of marijuana has fallen away over the years, as demonstrated by another of our favorite quotes, this one from President Barack Obama:

When I was a kid, I inhaled. That was the point.

Cause honesty is still the best policy….

FBI And Washington State Play Nice On Marijuana Background Checks.

Posted in Licensing

In a rapid turn of events, the FBI just agreed to give Washington State access to its background databases to allow Washington’s Liquor Control Board to better vet I-502 applicants and existing licensees. The FBI had previously said that it wouldn’t perform such checks without giving a clear firm reason for its refusal. The FBI will now assist the Liquor Control Board with criminal background checks, a welcome step in legitimizing the recreational marijuana business.

The FBI’s participation is ultimately a good thing despite what some conspiracy theorists may believe. These national, more comprehensive checks help to keep the industry clean as legalization sweeps the nation. In the tea leaves from the Federal government, it looks like the Feds are actually interested in the routine and uniform vetting of marijuana entrepreneurs. The FBI gave a statement that allowing the checks is “consistent with its priorities in letting legal marijuana experiments in Washington and Colorado move forward, including keeping people with troublesome criminal histories out of the industry.”

The FBI will not be running these checks themselves. Instead, as reported by Gene Johnson at the AP, the FBI emphasized that ”the nationwide background checks don’t give the businesses or the states that regulate them a free pass: They’re still expected to meet eight federal law enforcement priorities the DOJ outlined in a memo last summer.”

More and more states will be looking to the FBI for background checking information as medical and recreational marijuana becomes legal in their jurisdictions. It is a rare and valued moment when the states and the Feds can work together over marijuana reform and, though today’s announcement are just baby steps, it does mean that even the Feds are still moving in the right direction.

Marijuana Receiving Southern Hospitality

Posted in General

The South is coming around to marijuana legalization. In this article (really an analysis) on the financial news site Benzinga, reporter Spencer Schredder discusses the future of marijuana policy in the South and of the increasing support by Southerners for marijuana legal reform.

As a native Floridian, I am often told that Florida “isn’t really the South” and so what is going on there with marijuana is not a good indicator of what will happen to marijuana in the “real” South. But right now, Florida is leading the charge in the Southeast and looking like it will enact a medical marijuana regime via a popular vote in November and many (myself included) believe that if Florida allows MMJ legalization other Southern States will quickly follow. Though Florida is right  now getting massive attention from existing industry players, this article examines the legalization prospects for states you don’t much hear about when it comes to the Green Rush, like Kentucky, Maryland, Oklahoma, Tennessee, and Arkansas.

Much has already been written of how 82% of Floridians favor medical marijuana, but Kentucky (of all places) is looking closely at legalizing medical marijuana and 52% of its citizens favor such a move. Kentucky has an MMJ bill currently under review, but no vote date has yet been set for a vote.

Even Tennessee is getting back into the green game. We say “getting back” because for a brief period in the 1980s, medical marijuana was actually legal in the Volunteer State.  Although there appears to be majority support for medical marijuana in Tennessee, its lawmakers recently failed to get an MMJ bill passed. But all signs indicate lawmakers there will continue trying for such a bill.

Maryland too has repeatedly kicked around the idea of legalizing recreational marijuana and it already has medical laws on the books — though patients have not yet been able to access medicine yet because of current state restrictions — and it is on the verge of decriminalizing. We already told you about the marijuana prospects in Alabama, but we should not expect dispensaries in Georgia in 2014 as the State’s most recent MMJ bill is already dead.

So though not every Southern state is blazing a marijuana trial, the fact that so many of these states are even discussing legalization has to be considered good news for legalization nationwide.

Local Revolts: Tough Times for Marijuana with Cities and Counties.

Posted in California, General, Legal Issues, Oregon, Washington

Just about every day, another city or county in a marijuana state enacts an all-out ban on any type of marijuana commercial activity, whether it’s medical or recreational. Though we love fighting/suing these retrograde cities and counties at every turn, we also know how expensive and time consuming those fights can be for our cannabis clients.

Why are these bans happening? Do these cities and counties have the power to prohibit marijuana sales when the State says they can take place? And what happens with these bans when the courts get involved?

These bans primarily have two legal origins. Some come from state law provisions that explicitly allow cities and counties to opt out of marijuana implementation. Others come from the general police powers state constitutions usually grant cities and counties to regulate for the health, welfare, and safety of their own city/county citizens. For example, just last week, the State of Oregon decided that cities and counties can opt out of Oregon’s newly revised dispensary laws for at least a year if they so choose, and some Oregon cities and counties are doing exactly that. In Washington State, it is not clear whether cites and counties can legally forego adopting local recreational marijuana laws after passage of I-502, legalizing recreational marijuana. Though Washington’s Attorney General formally opined that cities and counties can refuse to participate in I-502, that opinion is not the law. As a result, some cities and counties in Washington are relying on their police powers to zone adult-use marijuana out of town. Only time (and litigation) will tell if those bans will hold up over time.

There’s a third (alleged) legal and political source for these bans: the current federal prohibition against marijuana. Meaning, some cities and counties seek to ban marijuana because it is still federally illegal. These cities and counties argue that no state law can force them to violate federal law. These bans are the most susceptible to legal attack because cities and counties cannot enforce federal law unless their State has authorized them to do so.

A few years ago, in a case we brought against a city on behalf of an MMJ cooperative, a police officer testified that the city should be able to ban MMJ activity altogether because the medibles it was selling were unregulated, and thus inherently unsafe. We turned this officer’s testimony on its head by getting him to admit that his city allowed a large and completely unregulated farmers market every week and that as far as he knew nobody had ever taken sick from that and the city had no plans to shut it down.

How are courts dealing with these local bans? California’s Supreme Court has held that cities and counties can ban medical marijuana facilities outright. Michigan’s Supreme Court ruled that dispensaries are illegal, though the State itself has ruled that municipalities cannot ban the personal use of medical marijuana. Washington’s Court of Appeals allowed a ban on MMJ dispensaries and collective gardens but this was probably due to its also finding that medical marijuana remains a criminal activity in Washington (this was before Washington legalized recreational marijuana).

What can you do if your city or county enacts seeks to ban the cultivation, processing, or dispensing of marijuana? You have the following options:

  • Fight. Realize that you will almost certainly lose at the lower, more local levels, and be ready to have to keep going higher in the court system before you will have a real shot at winning. This means that this sort of fight is not going to be either fast or cheap, but this also means that if you do prevail, you will be establishing some great precedent for the marijuana industry as a whole. In some instances, your facility stays open during the entire long fight.
  • Wait it out. You can try to wait out the moratorium/ban, hoping it will go away. If you do this, you are risking that the city or county will do nothing on the issue.
  • Lobby. You can try to lobby for a change in the city or county law. Like litigation, this can be lengthy and expensive, but it also sometimes works.
  • Move. Relocating your marijuana facility may be your best option. Then again, it may not.

The best offense is the best defense and that means you need to stay in tune with the political pulse in your city and county and if you get wind of a possible ban, you should immediately do whatever you can to prevent it. Local bans often pop up very quickly, with little warning or logic, so be ready.



A Tale of Two Marijuana Industries in Washington State.

Posted in General, Washington

On Friday of last week, our own cannabis super lawyer, Hilary Bricken, was part of a televised panel on “Cannabis Concerns” for the Seattle Channel. You can watch the video here.

This was her second time on the show discussing the impact marijuana laws have on cannabis businesses. This time the focus was on the Washington State legislature’s failure to unite (or even figure out) the state’s medical and recreational marijuana industries. Hilary shared the panel with State Senator Jeanne Kohl-Welles, Seattle City Attorney Pete Holmes, and Boris Gorodnitsky, co-owner of New Leaf Enterprises, a large medical cannabis producer. Though all of the panelists come from very different corners in terms of how they view the marijuana industry, they all shared the same basic worry about the unknowns created by Washington State lurching forward with disparate medical and recreational cannabis regimes.

The panel sought to address why the State Legislature had failed to pass a bill that would have unified and closely regulated the medical and the recreational marijuana sectors in the state. They also talked extensively about what the City of Seattle will do in January 2015, when its ordinance mandating that all marijuana businesses must have a state license to operate in Seattle takes effect when there is right now no way any medical cannabis business can secure such a license.

Washington enacted its medical marijuana laws back in 1998. Those initial laws were not intended to create a loose system under which patients could use marijuana for medical purposes at a greatly decreased risk of going to jail for doing so. Those laws were most emphatically not intended to set up a commercialized and regulated system for medical marijuana. In May 2011, the legislature (with substantial backing by Senator Jeanne Kohl-Welles) crafted a bill (Senate Bill 5073) that would have created a licensed system for producers, retailers, and patients. This system never came into being, however, because, under pressure from the Federal Government, Washington’s Governor, Christine Gregoire, vetoed major portions of that bill (essentially, any regulatory language) and the collective garden model popped out with little to no real regulation.

Then, I-502 passed in November 2012, legalizing adult use recreational marijuana in Washington State.

Because I-502 sets up a fairly comprehensive regulatory system for the growing, distributing, and selling of adult use marijuana in Washington State, it stands in stark contrast to medical marijuana’s essentially unregulated gray market system.

When I-502 passed in Washington the U.S. Attorney Jenny Durkan made very clear that the federal government viewed Washington’s existing medical marijuana system as not “tenable.” Not surprisingly, when the feds basically demand a change in a state’s marijuana regulatory system, lawmakers tend to listen. In reaction to this federal pressure, Washington’s legislature sought to harmonize the state’s medical and recreational laws but failed to pass anything that would have either combined the two marijuana regimes or more thoroughly regulated MMJ.

As you can tell from watching the show, Hilary is concerned about how the federal government is going to react to Washington’s inability to get its marijuana regulatory act together and, in particular, what sort of impact this will have on our law firm’s 200+ medical and recreational cannabis clients in Washington State. U.S. Attorney Durkan has, on more than one occasion, made very clear that federal enforcement regarding Washington MMJ will be ongoing. This concerns us not only for our own medical cannabis clients, but for our recreational clients as well. If Washington State does not clean up its marijuana act sufficiently to satisfy the federal government, it is at risk of having federal prosecutors run wild in this state.

Come on you politicians, why can’t we all just get along?

Speaking of the impact state laws can have on marijuana businesses, on April 22, 2014, we will be putting on a seminar addressing exactly that. Entitled, “What’s Next for Your Marijuana Business? A Seminar for I-502 Licensees,” we will be bringing on a slew of outside experts to address what cannabis businesses need to be doing to stay in compliance with the law, now that they are a legal business. Our cannabis business lawyers will be joined by a number of leading outside experts in discussing how to prepare your new marijuana business for the realities of the current marketplace. You will learn about registering and policing your trademarks, entering into enforceable non-disclosure agreements, interacting with state and federal government, and much more to equip your business with the tools it needs to survive and thrive. To learn more about this event and to sign up for it, please go here.

Marijuana in the Big Apple

Posted in New York

NOTE:  This is the first post by Simon Malinowski, Canna Law Group’s New York representative. Simon was part of the Canna Law team that when Washington State’s revised medical marijuana laws came into effect in July of 2011 and he played a large part in drafting the documents that enabled the state’s dispensaries to operate legally. Simon is now an attorney in New York City, where he will be the Canna Law Group’s attorney on the ground for when medical marijuana becomes legal there.  Simon will be periodically writing for our blog on New York’s cannabis laws.


As a New York attorney with cannabis law experience, I am always getting asked two questions about the state of medical marijuana in New York: “when will medical marijuana be legal in New York?” and “why isn’t medical marijuana legal there yet?” The answer to those questions is a complicated mix of procedural and political issues that have delayed passage of New York’s medical marijuana law, entitled the “Compassionate Care Act.”

Historically, New York’s leaders, most notably Senator Charles Schumer and former New York City Mayor Michael Bloomberg, have been “reluctant” to endorse a statewide medical marijuana law. The tide has turned as of late, but despite the New York State legislature getting its ducks in order to pass the Compassionate Care Act, passage of the proposed law is far from certain.

As is well-detailed in a recent Huffington Post article, New York’s State assembly has already passed the bill four times, and it is finally now looking as though there are enough votes in the State Senate to pass the Compassionate Care Act. What’s the hold up? Concern that Governor Andrew Cuomo will veto the bill.

The cloud hovering over wide-reaching legislative efforts is Governor Cuomo’s executive order allowing 20 state hospitals to provide medical marijuana to patients. Governor Cuomo’s overly planned and highly regulated system will likely rely on medicine coming from the federal government, and will be unlike anything done in any other state. We have serious doubts whether such a system can ever get off the ground, much less work for patients. For New York to move forward with medical marijuana, passage of the Compassionate Care Act is mandatory and that is where we will be devoting our efforts.