Today’s story doesn’t surprise me.

It involves one of the first cases I’ve heard of in which a lawyer was sanctioned for misconduct while representing a client in the cannabis industry. 

What doesn’t surprise me is that the misconduct had nothing to do with a lawyer violating federal law or assisting a client to do so.

By way of background, I’ve often cautioned Vermont lawyers against dabbling in cannabis law.  Not out of concern that they might assist cannabis clients to violate federal law.[1]  Rather, because I worry that some lawyers equate “I know a bit about marijuana” with “I’m equipped to provide competent advice to businesses that are participating in a complex and highly regulated industry.”  These businesses, like any other client, are entitled to competent representation.[2] 

They’re also entitled to conflict-free representation.  Indeed, at seminars and in blog posts, I’ve posed this question:

  • “Can you represent multiple applicants for the same type of license?  What if the clients agree to waive the conflict?  Then, what if one mentions to you a ‘trick of the trade’ that makes the application ‘more appealing’?”

I’m not aware of this situation arising [yet] in Vermont.  Which gets me back to today’s story.

Two weeks ago, a panel of the Arkansas Committee on Professional Conduct issued this order suspending a lawyer’s law license for 6 months.[3] The suspension followed the panel’s conclusion that the lawyer violated the confidentiality and conflict rules by representing two clients who were each seeking one of a limited number of cultivation licenses.[4]  Here’s what happened.

In November 2016, the company Courageous Ann applied for a license to cultivate medical marijuana in Arkansas.  Courageous Ann retained the firm at which Lawyer worked.  Soon thereafter, Courageous Ann also retained Canna, a consulting firm, to assist with the application process.  Throughout, Canna made documents available to Courageous Ann via Dropbox.  In turn, Courageous Ann provided Dropbox access to Lawyer.

In early July 2017, Lawyer left his firm.  The Arkansas disciplinary decision indicates that while Courageous Ann remained a client of the firm, Lawyer advised the company “that he remained their attorney.”  One of the owners understood that Lawyer continued to represent Courageous Ann in the application process, throughout which Lawyer continued to have access to the files in Dropbox.

In late July 2017, without informing Courageous Ann, Lawyer agreed to represent Delta Cannabis Company (Delta), a competitor of Courageous Ann that was also seeking an Arkansas license to cultivate medical marijuana.

In August 2017, Courageous Ann filed an application for a cultivation license. 

In September 2017, Delta filed an application for a cultivation license. 

In 2018, the Arkansas Medical Marijuana Commission issued five licenses. 

As you might have guessed, Delta received a license, but Courageous Ann did not. 

The application process included ranking the applicants.  According to the disciplinary decision:

  • “Shortly after information became public regarding rankings and licenses awarded, Courageous Ann discovered, from information they obtained from many sources, that Delta’s application mirror Courage Ann’s application in several sections.”

A few months later, the Arkansas Democrat-Gazette published Parts of application from firm awarded medical-pot growing license nearly identical to rival group’s material.  The article states:

  • “Electronic fingerprints on Delta Medical’s internal documents and company emails — provided by sources — show how the contents of Courageous Ann’s application funneled into Delta Medical’s hands through accounts linked to its previous attorney, [Lawyer].”

The article goes on to highlight the similarities between the two applications.[5]  Then, it reports that:

  • “The Democrat-Gazette obtained a copy of the Microsoft Word document that Delta Medical Cannabis used to complete its cultivation license application. The newspaper used the metadata buried in the document file to trace its apparent edit history. The data show that someone using the sign-on of [Lawyer] replaced Courageous Ann’s name and biographical information with the same information for Delta Medical Cannabis Co.”

The article continues:

  • “For instance, the Microsoft document data reveal that the person using Lawyer’s sign-on deleted Courageous Ann’s information from the section detailing its business plan and replaced it with Delta Medical Cannabis’ name while keeping the wording roughly the same.”

In the end, the Arkansas disciplinary panel concluded that Lawyer violated Arkansas’s rules on confidentiality[6] and concurrent conflict interests.[7] The 6-month suspension will be followed by 18 months of disciplinary probation.

Again, I’m not surprised.

The case serves as a reminder of what should be obvious: cannabis clients are no different than other clients. 

Does the area of law have its own complexities? 

Yes. 

Do the other rules continue to apply?

Yes.  Just as they would when a lawyer represents a client in any other area of the law.

As always, let’s be careful out there.

[1] Rule 1.2(d) of the Vermont Rules of Professional Conduct states that 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.”  The rule draws no distinction between state and federal law, or between laws that are more vigorously enforced than others.  And, for now, marijuana and THC remain Schedule 1 drugs under the Controlled Substances Act.  However, Comment [14] to Rule 1.2 makes clear that a lawyer does not violate Rule 1.2(d) by advising clients on matters that are legal under Vermont’s regulatory scheme.

[2] Thus, the questions I ask of lawyers who I suspect are interested in dabbling in cannabis law include:

  • Do you know the different types of licenses available in Vermont?
  • Do you know whether there are any requirements for the buildings in which a licensee locates a business? 
  • If your client is a cultivator or manufacturer, does the THC level remain the same throughout the process?  Does it even matter?
  • Whether in Vermont or a state to which your client will ship product, do the food laws apply.
  • Oh, and speaking of interstate transportation, does your client intend to accept payment by credit card?
  • What if your client’s labels or advertisements over or understate a product’s potency? 
  • What if your cultivator client wants to trademark a name for a new ‘product?
  • What’s your client going to do with revenue (cash) generated from the business?

[3] H/T David Kluft for sharing the order here via LinkedIn.

[4] The panel also concluded that the lawyer committed misconduct by agreeing to pay $10,000 to an expert consultant without the client’s consent.  The money was returned to the client.  Today’s post focuses on the confidentiality and conflict rules, not this failure to communicate with the client.

[5] Despite the similarities, the Commission ranked Delta’s application 5th and Courageous Ann’s 46th.  To compare, the Arkansas Democrat-Gazette published the applications here.

[6]  Like Vermont’s, Colorado’s confidentiality rule prohibits a lawyer from disclosing information relating to the representation of a client without the client’s consent. The panel concluded that Lawyer violated the rule by sharing information related to Courageous Ann’s application with Delta without Courageous Ann’s consent.  Among other things, the panel found that as Delta was preparing its application, one of its constituents sent an internal email advising others associated with Delta that Lawyer had agreed to “provide assistance with [the application] by providing a dispensary summary from an application he has already turned in.”

[7] The panel concluded that Lawyer violated the conflict rule by representing Delta without Courageous Ann’s consent in a matter in which the two were in “direct competition” for a cultivation license.  Again, Colorado’s rule mirror’s Vermont’s. Both state that a concurrent conflict exists if “(1) the representation of one client will be directly adverse to another client; or (2) there is a significant risk that the representation of one or more clients will be materially limited by the lawyer’s responsibilities to another client, a former client or a third person or by a personal interest of the lawyer.”

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