New Jersey Attorneys Risk Ethical Sanctions Representing Cannabis Clients

 

With states passing laws permitting the medicinal and recreational Medical Marijuanause of marijuana, there are new opportunities for attorneys to provide legal services to clients in the cannabis industry. However, New Jersey attorneys seeking to counsel clients in complying with the New Jersey Compassionate Use Medical Marijuana Act (the “NJ Marijuana Act”) risk ethical sanctions under the current Rules of Professional Conduct (“RPC”) 1.2(d) (which prohibits a lawyer from counseling or assisting a client in conduct that the lawyer knows is illegal or criminal) because such conduct remains illegal and criminal under federal law.

The NJ Marijuana Act allows patients with one of 11 designated conditions to receive marijuana with the approval of a doctor registered with the program and provides for the establishment of at least six alternative treatment centers, which are required to both grow and dispense marijuana. The ethical issues raised under RPC 1.2(d) arise from the fact that the sale, distribution, and/or use of medical marijuana is illegal under federal law, but is lawful pursuant to New Jersey law. Accordingly, one can imagine the ethical quandary facing an attorney retained to do something as simple as negotiating a commercial lease when the attorney knows that the client intends to use the leased space to grow medical marijuana.

Under the Federal Controlled Substances Act (“CSA”), cannabis is a “Schedule I” substance. 21 U.S.C. § 812. Under the CSA, the manufacture, distribution and possession of a Schedule I substance is a felony and can subject a defendant to punishment up to life in prison. 21 U.S.C. § 841(b). While the CSA is still in effect, 23 states, including New Jersey, have passed laws legalizing marijuana use in some form. In 2013, Deputy Attorney General James Cole issued a memorandum on behalf of the U.S. Department of Justice (“DOJ”) entitled “Guidance Regarding Marijuana Enforcement.” The “Cole Memorandum,” as it is often referred to, provides the DOJ will look to eight “enforcement priorities” in determining whether to prosecute those operating in compliance with state cannabis laws. In other words, where cannabis businesses operate in strict compliance with state law and in manner consistent with federal enforcement priorities, federal law enforcement, as a matter of discretion, will be unlikely to prosecute those businesses for a CSA violation.

The Cole Memorandum Enforcement Priorities are:

1) Preventing distribution of cannabis to minors;

2) Preventing cannabis revenues from going to support criminal enterprises;

3) Prevent diversion of cannabis to states where it not legal;

4) Preventing “state-authorized marijuana activity from being used as a cover … for trafficking of other illegal drugs or other illegal activity”;

5) Preventing violence and the use of firearms in the production and distribution of cannabis;

6) Preventing drugged driving and other adverse health effects;

7) Preventing the growth of cannabis on public land; and

8) Preventing cannabis use or possession on federal property.

Because the Cole Memorandum is not a statute or regulation, it is not binding. As such, it could be revised or ended at any time.

On September 29, 2014, less than three months after the New York Compassionate Care Act was signed (the “NY Marijuana Act”), the New York State Bar Association – Committee on Professional Ethics issued Opinion 1024 addressing the ethical issues facing New York Attorneys representing clients in the cannabis industry in New York. The Opinion concludes that the New York Rules permit lawyers to give legal assistance regarding the NY Marijuana Act beyond a mere discussion of the legality of the client’s proposed conduct and that the state law authorizes lawyers to provide traditional legal services to clients seeking to act in accordance with state law. Further, the Opinion concludes that RPC Rule 1.2(d) is not intended to prevent lawyers from providing assistance that is necessary to implement state law and to effectuate current federal policy. The Committee, however, cautioned that this Opinion might need to be reconsidered if federal enforcement policy were to change materially.

The New Jersey State Bar Association (“NJSBA”) has established an ad hoc committee to review the ethical issues raised under New Jersey’s RPC 1.2(d) for an attorney representing a client in connection with the sale, distribution, or use of medical marijuana as authorized under the NJ Marijuana Act. The NJSBA committee will review the issues as they pertain to New Jersey lawyers representing clients seeking to comply with New Jersey law relating to medical marijuana, will review how other states have addressed these issues under their respective Rules of Professional Conduct, and will make recommendations to the NJSBA Executive Committee and Board of Trustees for appropriate revisions to the New Jersey Rules of Professional Conduct, to be presented to the Supreme Court of New Jersey, so that New Jersey attorneys may counsel and assist clients in complying with applicable law relating to medical marijuana, without the potential for ethical sanctions.

Depending on the political party that wins the White House this November, the Cole Memorandum may be revised or ended and federal enforcement of the CSA could resume with respect to marijuana. Should this occur, attorneys could be at risk for more than just ethical violations if they counsel cannabis clients. Accordingly, New Jersey attorneys need to tread carefully until the NJSBA amends New Jersey’s RPC 1.2(d) before counseling clients on issues relating to the NJ Marijuana Act. We will continue to monitor this situation as it develops.

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Author:
Eric’s varied litigation and transactional experience includes complex commercial/ chancery/federal matters, preliminary injunctions, partnership/corporate shareholder actions, will & probate litigation, guardianships, bankruptcy, bankruptcy court litigation and corporate dissolutions, business transactions & corporate law, asset recovery/repo, debt collection & judgment enforcement, receiverships, foreclosure, fraudulent transfer litigation, attorney & professional ethics, entertainment and intellectual property, internet and website development law, real estate disputes and restrictive covenants, trial & appellate practice in state and federal courts. Eric has also been appointed by the court to serve as counsel to an alleged incapacitated person in a guardianship matter and is a candidate for judicial appointments in complex commercial litigation matters as a special fiscal agent, receiver and provisional director.

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