California Issues (Draft) Formal Ethics Opinion for Attorneys Advising Marijuana Clients
It escaped my attention earlier, but it looks like the California Bar Association in June issued guidance for California-licensed attorneys informing them of what legal services they may (and may not) ethically provide to marijuana clients. The 16 page opinion from the State Bar Standing Committee on Professional Responsibility and Conduct (COPRAC) can be found here. (Note that this is billed as an interim opinion – suggesting it could later be modified – but the period for comments on the draft has already expired.)
Here’s the summary of the Opinion:
A lawyer may ethically advise a client concerning compliance with California’s cannabis laws and may assist the client in conduct permitted by those laws, despite the fact that the client’s conduct may violate federal law. Such advice and assistance may include the provision of legal services to the client that facilitate the operation of a business that is lawful under California law (e.g., incorporation of a business, tax advice, employment advice, contractual arrangements and other actions necessary to the lawful operation of the business under California law). However, a lawyer may not advise a client to violate federal law or provide advice or assistance in violating state or federal law in a way that avoids detection or prosecution of such violations. The lawyer must also inform the client of the conflict between state and federal law, including the potential for criminal liability and the penalties that could be associated with a violation of federal law. Where appropriate, the lawyer must also advise the client of other potential impacts upon the lawyerclient relationship, including the attorney-client privilege, that may result from the fact that the client’s conduct may be prohibited under federal law.
In my book, I discuss at length the ethical dilemma facing attorneys who deal with marijuana clients (see book pages 626-644). The dilemma stems from the Model Rules of Professional Conduct; Rule 1.2(d) in particular bars attorneys from, inter alia, “assist[ing] client[s] . . . in conduct that the lawyer knows is criminal.” In light of this (and related Rules), may attorneys assist clients engage in marijuana activities that are permitted by state law if those same activities are prohibited by federal law?
As I note in the book, every jurisdiction that has addressed this question has reached the same basic conclusion: Yes, attorneys may provide the same legal services to marijuana clients that they offer to other types of clients. However, jurisdictions have reached this conclusion through different routes. Some jurisdictions – like New York – have interpreted MPRC 1.2(d) permissively. Those permissive jurisdictions say that as written, Rule 1.2(d) allows attorneys to provide a full range of legal services to marijuana clients, notwithstanding the federal marijuana prohibition. By contrast, some jurisdictions – including Colorado and Ohio – have interpreted MPRC 1.2 more restrictively. Those restrictive jurisdictions say that as written, Rule 1.2(d) limits the types of services their licensed attorneys may ethically provide to marijuana clients. (The Problems in the book explore whether the line drawn by these restrictive jurisdictions between services is cogent or defensible. See pages 629-630, n.1, Problems 12.11-12.13.) Nonetheless, it appears that each of the jurisdictions that has interpreted MPRC 1.2 restrictively has subsequently amended the language of its Rule 1.2 (or added comments thereto) to authorize attorneys to provide the full suite of legal services to marijuana clients. That is why I say that every jurisdiction that has addressed the question posed above has reached the same basic conclusion: attorneys may ethically provide the same legal services to marijuana clients that they would provide to other types of clients.
In the Opinion linked above, California takes a somewhat different path, but it ultimately reaches the same conclusion as every other jurisdiction. As far as I can tell, the state has never interpreted original Rule 1.2(d) to prohibit lawyers from providing some services to marijuana clients. Nonetheless, in 2017 (I think), the state added a Comment to its Rule 1.2 that seems plainly designed to counter such an interpretation:
Comment 6: [Rule 1.2] permits a lawyer to advise a client regarding the validity, scope, and meaning of California laws that might conflict with federal or tribal law. In the event of such a conflict, the lawyer may assist a client in drafting or administering, or interpreting or complying with, California laws, including statutes, regulations, orders, and other state or local provisions, even if the client’s actions might violate the conflicting federal or tribal law. If California law conflicts with federal or tribal law, the lawyer must inform the client about related federal or tribal law and policy . . . .
(For California’s full Rules, see here; note that California numbers its Rules somewhat differently than the MPRC, so the relevant provision is called Rule 1.2.1.)
This Comment is nearly identical to the one adopted by Colorado after it had interpreted the language of original MPRC 1.2(d) to bar its lawyers from providing certain (poorly defined) legal services to marijuana clients.
Regardless of how it got there, however, California – like every state before it – reached the conclusion that there is no ethical problem with lawyers helping clients to possess, grow, and / or distribute marijuana, even though such activities remain criminal under federal law. California may not have needed to adopt Comment 6 to reach that conclusion; after all, other jurisdictions concluded that original Rule 1.2 already permitted lawyers to advise marijuana clients. But I suppose it does no harm to provide such authorization explicitly in the language of the Rule itself (or the comments used to interpret it), and to reinforce that clarity by issuing a formal Opinion on the matter.
While the California Bar reached the same result as other jurisdictions, California’s ethics Opinion is noteworthy in at least a few respects:
1. California disavows reliance on federal marijuana enforcement policy.
As I discuss in the book, New York’s permissive reading of original Rule 1.2 rested in part on the fact that the federal government was not enforcing its marijuana ban at the time. But it warned that “If federal enforcement were to change materially, this Opinion [authorizing lawyers to provide legal services to marijuana clients] might need to be reconsidered.” Page 634.
The California Opinion, by contrast, leaves nothing to chance. It emphatically states that a lawyer’s ethical obligations under its Rule 1.2.1 are unaffected by whether (or not) the federal government is enforcing its marijuana ban:
None of these conclusions [about the services a lawyer may provide to marijuana clients] depend on the content of federal enforcement policy, which is not a factor discussed in any of the relevant provisions. The fact that a federal law is not regularly enforced does not by itself render the law a nullity or relieve those subject to the law of their obligation to comply. Moreover, because the specifics of announced federal enforcement policies can and do change with changing times and changing administrations, they provide uncertain support for ethics policy making. [Opinion page 8, n.4]
To be sure, I think it highly unlikely the federal government will try to enforce its marijuana ban against state-law abiding suppliers anytime soon. But one can hardly blame the California bar for addressing — and dispelling any confusion that might arise from — this unlikely scenario.
2. California provides interesting details about what sorts of services lawyers may NOT provide to marijuana clients.
California’s ethics Opinion includes two standard caveats for advising marijuana clients. First, as noted above, it instructs lawyers that they must inform clients about any conflicts between state and federal (or tribal) law. Second, it warns that lawyers “may not . . . provide advice or assistance in conduct that enables the client to evade detection or prosecution under California or federal law.” [Opinion page 12.]
The Opinion also posits an interesting hypothetical scenario that would run afoul of the second restriction. It posits a lawyer who is asked by a marijuana supplier to provide the standard range of services, including, e.g., help with applying for state permits and drafting sales contracts. But in addition, the lawyer and supplier discuss the possibility that the lawyer will:
(1) hold client funds in excess of any amount required to cover legal fees in the lawyer’s client trust account, as a “rainy day” fund, with the possibility that federal authorities might seize the client’s assets; [and]
(2) assist the client in establishing offshore bank accounts into which the proceeds of the business may be placed. [Opinion page 2.]
The Opinion concludes that the lawyer would be prohibited from providing either of these two services. It explains:
The client’s request that the lawyer permit the client to create a “rainy day fund,” and keep it in the lawyer’s trust account, to protect against the risk of a federal seizure of the client’s assets clearly falls into that category, since it seems principally intended to conceal those assets from federal law enforcement. The client’s request for assistance in establishing offshore bank accounts to receive the proceeds of the business very likely falls into the forbidden category as well. If the lawyer knows that the client expects such assistance, the lawyer should advise the client of the limitations on the lawyer’s conduct imposed by the Rules of Professional Conduct . . . [Opinion page 12.]
At first glance, these two restrictions on legal services may seem a bit puzzling – at least insofar as the lawyers’ services are being used to frustrate enforcement of federal (rather than state) law. After all, if the state bar permits a lawyer to facilitate the violation of federal drug laws (say, by drafting a sales contract between a grower and a retailer), why doesn’t it also permit the lawyer to facilitate violations of federal money laundering laws as well? But I suspect the reason may be that the Bar is more squeamish about lawyers getting involving in crimes involving fraud and deceit. The two prohibited actions described above involve fraud / deceit, whereas drug dealing (at least, in today’s transparent, state legal marijuana market) does not. Indeed, the legal services the Opinion deems permissible — like drafting a contract for the sale of marijuana – arguably expose drug activities to authorities, rather than conceal them. After all, the contract would memorialize an arrangement that is conducted clandestinely in black markets and thus, more difficult to detect. At bottom, it appears the state Bar is comfortable allowing lawyers to help clients break federal law, but only if the clients (and lawyers) do not seek to hide their activities from the government.
3. California reminds lawyers that their ethical obligations also include a requirement of competence.
As my students know well, marijuana law is enormously complicated because any one case can implicate several advanced legal subjects, from criminal law to tax law to administrative law to constitutional law (among many others). For this reason alone, it’s very difficult for any lawyer to master all of the distinct fields on which a marijuana client might need assistance. Of course, lawyers who have taken a course – or read a good book! – on marijuana law will have a big advantage! But even the best trained lawyer needs to recognize that sometimes they will need to bring in additional counsel to help with a particular matter outside their area of expertise. And the California Bar Opinion reminds them that doing so is part of their ethical obligations to clients:
Competent representation of a regulated cannabis business requires specialized learning: notably, mastering a novel, complex, and rapidly evolving body of state and local statutes and regulations. In addition, the scope of competent representation will always encompass providing basic information on conflicting federal law to comply with rule 1.2.1 and may often require additional advice going beyond such information. A lawyer who is unable to acquire the full range of required learning and skill through study, or through consulting or associating with another attorney, should limit the representation to those issues that she has or can acquire the requisite learning and skill and advise the client to obtain separate counsel with sufficient learning and skill to represent the client on other issues presented. [Opinion page 12.]
4. California warns lawyers (and in turn, clients) about the vulnerability of client confidences.
I’ve written about federal attempts to seize information gathered by state regulators for use in enforcing the federal marijuana ban. See Mikos, Can the States Keep Secrets from the Federal Government? (also excerpted in the book pages 720-721). That work recognizes that state privilege rules do not bind federal agents. Hence, even if a client may be able to confide in an attorney without worrying about the information she provides being used by state regulators, the same cannot be said of federal regulators. In particular, federal agents could use the crime-fraud exception to the attorney client privilege to obtain information a marijuana client shared in confidence with her attorney. The Opinion notes this possibility and instructs attorneys to inform clients about it:
To the extent that conduct permitted under state law constitutes a federal crime, there is a risk in a federal court proceeding that the lawyer’s files may be discoverable and the lawyer may be called as a witness, that the court will rule that because of the crime-fraud exception the privilege does not apply to confidential communications between lawyer and client, and that the lawyer will be ordered to testify concerning those communications. . . .
The potential unavailability of the privilege and its consequences should be disclosed to the client at the outset of the representation, because it is information that is “reasonably necessary to permit the client to make informed decisions regarding the representation.” [Opinion page 13.]
5. California opines that lawyers may also own marijuana businesses.
Apart from whether they may advise marijuana clients without running afoul of MPRC 1.2(d), a related issue is whether lawyers may invest in marijuana businesses (or, e.g., use or grow marijuana themselves). This latter action implicates a separate ethics rule: MPRC 8.4 bars an attorney from “commit[ting] a criminal act that reflects adversely on the lawyer’s honesty, trustworthiness or fitness as a lawyer in other respects.”
As I note in the book, fewer states have addressed the question whether a lawyer violates her ethical obligations by growing marijuana, using marijuana, or investing in a client who supplies the drug. See book pages 635-638. The California Opinion, however, appears to give these actions its blessing. In the hypothetical scenario to which the Opinion is addressed, the lawyer wants to accept a stake in the marijuana client’s business in lieu of accepting more traditional legal fees (i.e., cash). The California Opinion finds this arrangement to be indistinguishable (ethically speaking) from advising the client in the first instance – i.e., both advising the client and investing in its business are permissible:
The facts presented in this opinion raise the possibility that the lawyer will make an investment in the entity that carries out the business in lieu of legal fees. Given the analysis above, there can be no ethical objection to such an investment based on a conflict between state and federal law, so long as the arrangement is not intended to evade detection or prosecution under California or federal law. The same principles that permit a California business to receive a California lawyer’s assistance in complying with California law, notwithstanding any resulting violation of federal law, should also permit the client to pay for those services and for the lawyer to receive payment in the form of an interest in that business. [Opinion page 14.]
I would assume, based on this latter conclusion, that the lawyer may also use marijuana and produce the drug for her own consumption, at least to the extent permitted by state law.
That’s it for now. For more on lawyer discipline in this field, see this previous post: UPDATE: The Criminal case against a San Diego Marijuana Attorney has Settled