CannaBizDisputes™

Sometimes it’s good to have a New York State of Mind, and not hop on a Midnight Train to Georgia. Both New York and Georgia have passed legislation authorizing the sale of certain cannabis products. In Georgia, however, a recent decision of the Georgia Supreme Court could impeded clients from tailoring their businesses to comply with the legislation. Here are the details:

Georgia permits the sale of certain high-CBD/low-THC cannabis oils for medical marijuana purposes. In fact, as recently as in early May, Georgia’s Governor Brian Kemp signed legislation permitting the establishment of up to 30 state-licensed retailers of such products. But lawyers in Georgia cannot counsel clients about these products. In a recent ruling, Georgia’s Supreme Court joined Oklahoma, Mississippi and South Dakota in holding that under their states’ respective professional conduct rules, lawyers cannot advise cannabis businesses because of the longstanding federal prohibition of such activity under the Controlled Substances Act.

In particular, the Court wrote that while it was mindful of the desire of lawyers to assist Georgia’s cannabis industry, “this Court has long prohibited lawyers from counseling and assisting clients in the commission of criminal acts. The passage of a Georgia statute purporting to permit and regulate conduct that constitutes federal crimes does not change that long-standing principle.” This ruling leaves cannabis businesses in Georgia without legal counsel to guide them through the legal minefields and may hamper the development of the cannabis industry in the state.

Thankfully for New York, legal ethics authorities take a different view. Cannabis businesses in New York can access legal advice to help them navigate this highly regulated industry. In November 2019, New York State Bar Association’s Committee on Professional Ethics, in Opinion 1177, reaffirmed its 2014 guidance that a lawyer may ethically assist a client in conduct designed to comply with New York’s medical marijuana law, the Compassionate Care Act. The Opinion notes that the US Department of Justice (DOJ) continues to permit states to implement their medical marijuana laws and that federal legislation prohibits the DOJ from preventing states from doing so. Although New York state ethics rules traditionally prohibit lawyers from encouraging or assisting a client in conduct that violates federal law, “the situation is different where the state executive branch determines to implement the state legislation by authorizing and regulating medical marijuana, consistent with current, published federal executive-branch enforcement policy, and the federal government does not take effective measures to prevent the implementation of the state law.”

Of course, Ethics Opinion 1177 is limited on its face to just medical marijuana. In theory, New York could take a more rigid approach on adult-use, particularly since federal legislation does not as broadly protect state-sanctioned adult-use businesses from federal prosecution. However, given the regulatory scheme that is soon to be developed by New York’s Cannabis Control Board and the lack of federal prosecution of adult-use businesses in states where such sales have been legalized, one would hope that the New York State Bar Association’s Committee on Professional Ethics would expand its analysis to cover the newly legalized adult-use cannabis business under New York’s Marijuana Regulation and Taxation Act.

For more information on the topic discussed, contact:

• Paul D. Sarkozi  |  sarkozi@thsh.com  |  212-508-7524