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A Match Made in Heaven: Cannabis Law and the Rules of Professional Conduct

November 3, 2016Alerts Cannabis Law Alert

As the laws in 24 states and the District of Columbia have changed to allow for the sale of some form of cannabis (either for medical or adult-use purposes), lawyers have frequently been confronted with a conundrum in the form of the rules of professional conduct that govern the ethical conduct of lawyers. Lawyers who wanted to practice in the space (and businesses who need their assistance) were faced with the dilemma of providing legal advice for conduct that is legal in your state, but not on a federal level. Does this mean that a business looking to get into this space is going to be without counsel?

Before addressing the answer, it is important to understand the issue. First, the federal Controlled Substances Act (21 U.S.C. § 811, et seq.) provides that cannabis is a Schedule 1 drug. This means – from a federal standpoint – that it is unlawful to “manufacture, distribute, dispense, or possess a controlled substance.” Second, many states followed some form of the Model Rule of Professional Conduct to govern legal ethics. Of specific import for cannabis law is Rule 1.2(d), which provides: “A lawyer shall not counsel a client to engage, or assist a client, in conduct that the lawyer knows is criminal or fraudulent, but a lawyer may discuss the legal consequences of any proposed course of conduct with a client and may counsel or assist a client to make a good faith effort to determine the validity, scope, meaning or application of the law.”

Some states, like Ohio, interpreted their state-law equivalent of Rule 1.2(d) as barring lawyers from providing legal advice in this space because, to do so would run afoul of federal law regardless of whether the state has made the sale of cannabis legal within its borders. Other states, like Pennsylvania, while not barring the provision of legal advice, called the provision of it into question unless and until its rules of professional conduct were modified accordingly.

On October, 26, 2016, Pennsylvania became the latest state to modify its rules governing lawyers to accommodate this burgeoning area of the law. In doing so, the Pennsylvania Supreme Court analyzed what other states had done to remedy this dilemma. Some, like Colorado and Washington, added a comment to Rule 1.2 to allow lawyers to practice in this space. Others, like Arizona, Connecticut and Hawaii, amended their versions of Rule 1.2 to specifically allow for the provision of legal services relating to a business that is legal within the state. After completing its analysis, Pennsylvania adopted the latter approach.

Under Pennsylvania’s new Rule 1.2(e), a “lawyer may counsel or assist a client regarding conduct expressly permitted by Pennsylvania law, provided that the lawyer counsel the client about the legal consequences, under other applicable law, of the client’s proposed course of conduct.”

So what does this all mean?

In its simplest form, the restraints on Pennsylvania lawyers have been lifted to practice in the cannabis legal market on one important condition. Any advice that you provide must include an admonishment to your client that what they want to do is otherwise unlawful under federal law, including the consequences of violating that federal law.

Will this admonishment persuade clients not to enter this space; unlikely. What it will do, however, is provide your clients with full disclosure; a concept generally advanced by the Rules of Professional Conduct in every state. At the same time, these type of changes to the rules across the country foster individuals and businesses access to legal services that they may not otherwise be permitted to get. After all, the leadership of the states (and District of Columbia) who permit the sale of some form of cannabis would rather have cannabis businesses follow and conform to the applicable laws; is there any job not better suited for a lawyer.

If you have any questions about this alert, please contact Joshua Horn at [email protected] or 215.299.2184 or any of the members of Fox Rothschild's Cannabis Law practice group.

*Please be mindful that possessing, using, distributing and/or selling marijuana is a federal crime, and no legal advice we give is intended to provide any guidance or assistance in violating federal law nor will it provide any guidance or assistance in complying with federal law. Please also note that we are not advising you regarding the federal, state or local tax consequences of engaging in any business in this industry.