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ABA January 2015 Continuing Education Webinar Notes

by merlin on February 27th, 2015
  • Sumo

These notes are in addition to the program materials themselves.

The Wild World of Cannabis

ABA CLE Webcast Notes – Originally broadcast in January 2015

 

 

John Minan (Associate Professor of Law at University of San Diego)

Federal Law (Classification as Schedule I drug) preempts State standards where inconsistent, but State doesn’t enforce if it doesn’t want to.

  • 2009, US Attorneys told not to prosecute State persons in compliance with medical marijuana
  • 2013 memo – States with sufficient mechanisms won’t be interfered with, but must avoid spillover into other States
  • No med marijuana in the future as of that memo

Preemption:  Only happens if there is a CLEAR CONFLICT.  Nebraska and Utah suit asks Supreme Court to use preemption against Colorado for non-medical

Scott Rhodes – Jennings Strauss (on Professionalism in Cannabis Cases)

Dilemma – can lawyers ethically advise pot clients under ABA Model Rules

State response:

            Lawyers advise client fully (State law OK but conflict with federal law); general trend follows this (AZ) approach

North Dakota – it’s actually per se unethical for attorneys to even use cannabis medically.  Colorado approach – exactly opposite (no connection between legal representation and personal use, per se).  In 6/13, extended from medical to recreational use in CO (under consideration in Washington and Nevada).

Hilary Bricken (Harris Moure) – Representing Marijuana Business

Recreational versus Medical Marijuana – Laws, regulations, permissible business entities (eligibility AND business structure) differ between the two

CA versus WA – CA must be a non-profit cooperative or not allowed

 

Be aware of idea of PROSECUTORIAL DISCRETION (affects federal memos)

 

Raids versus “Landlord Letters” – latter is a “softer touch”, gives 30 days to move out

Federal Conflict

  • Banking
  • insurance availability
  • bankruptcy
  • taxes

Have to make sure that fee agreement expressly states the conflict with federal law and expressly addresses idea that you can only advise on how to comply with State law – can only represent them SO MUCH and SO FAR.

Sean O’Connor (University of Washington School of Law) – Food and Drug Law

3 Major Cannabis Products:

  • Food
  • Drug
  • Dietary Supplements

These laws came from:

  • “Filled Milk” scandals (early 20th Century)
  • Patent Medicine cases (snake oil medicines)
  • Thalidomide cases

3 Major Statutes:

  • Food, Drug, and Cosmetics Act
  • Public Health Act
  • Dietary Supplement Health and Education Act

Questions of PURITY AND POTENCY, and also questions of SAFETY AND EFFICACY (latter includes idea that something else achieves same effect)

  • Have to go through approval process for Foods, also for Drugs, as well as obtaining “NDA” (“New Drug Approval”) – many years and lots of $
  • FDA has been issuing warning letters, but FEW

Cannabis as a DIETARY SUPPLEMENT:

  • Requires only PURITY and POTENCY
  • Relies on CUSTOMER input, rather than established medical claims
  • St. John’s Wort

Tsan Abramson (Cobalt Law) – Trademark/Trade Dress Issues

Terms can be:

  • FANCIFUL/ARBITRARY
  • SUGGESTIVE
  • DESCRIPTIVE
  • GENERIC

  • Products containing THC are still federally illegal, BUT
  • Can seek federal mark protection for products and services that SUPPORT the brand.

DON’T:

  • Seek registration for non-cannabis product and try to use protection for cannabis products of same name
  • Will lose the State protection (ex. Colorado)

Henry Wykowski (Wykowski and Associates) – Tax Issues

  • IRS § 280E: Expressly PUNITIVELY disallows ordinary and necessary business expenses for sale of cannabis (passed in 1982 – War on Drugs)

Champ decision:      CAN deduct for cost of goods sold (cannabis industry)

What if they sell non-cannabis goods (i.e. t-shirts)? They can deduct that; need to develop a formula allocating the two

  • Have a defensible 280E formula (assume they WILL be audited)
  • If audited – ensure they IMMEDIATELY get help on it!!!!!!
    • Don’t let client do it themselves, use an attorney (for privilege; no such privilege for accountants)
    • Advise client – UNDER NO CIRCUMSTANCES respond to letter themselves

Audit:

            Looking for SUBSTANTIATION OF EXPENSES (so keep records)

  • Look at gross sales
  • Look at cost of purchases
  • Look at how 280E allocation done

Julie Anderson Hill (University of Alabama School of Law) – Banks and Federalism

  • Banks often don’t even service the ATMs used in cannabis stores
  • Blame the federal controlled substances act (Anti-money laundering laws)
  • FDIC – “reputation risk”

Questions remain – does the UCC apply (Arts. 2 and 9, especially), and what about BANKRUPTCY?

Dwight Merriam (Robinson+Cole) – Real Estate/Land Use Issues

Even if Cannabis were downgraded to Schedule II regulation (like morphine or codeine, the real estate issues would remain).

  • federal and State crime free/drug free zones, school zones, etc.
  • “Drug Free/Crime Free addendum to leases, prohibiting State-legal use of marijuana since it is federally illegal
  • Landlords often include provision in lease prohibiting growing or use EXPLICITLY
  • Insurance requirements? Electricity requirements?  Mold?  Trespassing?
  • No duty to allow tenant under fair housing act, ADA, etc.

See Los Angeles regulations for most comprehensive

Katharine Liao (DLA Piper) – Employment Law

What about medically-prescribed marijuana use?  20 States allow medical, 4 States allow recreation (now Alaska and DC, also).

  • However, 19 States have express statutes saying that employers don’t have to accommodate use/possession during working hours
  • 4 States have express laws allowing employees to be disciplined, and another 4 have case law

Positive test alone:

  • Not enough in DELAWARE, ARIZONA, MINNESOTA
  • Enough (Zero Tolerance) in CALIFORNIA, MONTANA, OREGON, WASHINGTON
  • Colorado – Coats v. Dish Network, LLC – decision still pending (no evidence he ever used while working; quadriplegic; medically-prescribed
  • New Mexico – carrier must reimburse for med. marijuana costs
  • Michigan – employer can terminate but employee gets unemployment

Is there a disability?

  • Generally, employers must provide “reasonable accommodation”
  • Generally, underlying medical problem being treated by med marijuana will require accommodation

Employers need to continually monitor and update employee drug policies.

  • Courts have consistently been very protective of employers terminating over WORKPLACE SAFETY ISSUES

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