Ad Astra Law Group, LLP

How to Choose the Right Attorney For Your Cannabis Industry Legal Issue

By Hannah Stitt

California’s cannabis industry leapt further into the realm of legitimacy via the recent enactment of Section 1550.5(b) of the Civil Code and Section 956(b) of the Evidence Code: “commercial activity relating to medicinal . . . or adult-use cannabis conducted in compliance with California law . . . shall be deemed . . . [the] lawful object of a contract” (Cal. Civ. Code § 1550.5(b)), and the “exception to [attorney-client privilege] . . . shall not apply to legal services rendered in compliance with state and local laws on medicinal cannabis or adult-use cannabis . . . provided the lawyer also advises the client on conflicts with respect to federal law” (Cal. Evid. Code § 956(b)).

Received quietly by both the industry and the media, the passage of these laws means big changes for California’s cannabis industry: suddenly all contracts, including those for insurance policies, money lending, commercial leases and attorney services, are enforceable in California state courts! While leaders must continue to push the envelope for greater legal protections for the burgeoning cannabis industry in other states, California’s industries may now utilize legal services in the same manner as has traditionally benefited business people in other American industries.

“But, how does an entrepreneur with new access to the legal services industry know who to rely on?”

It can be very difficult to find high quality and cost-effective legal services — and people rarely have heaps of time to spend calling all their loose connections for a stellar legal referral, or assessing the validity of each and every review posted by a stranger with an internet connection. No matter whether your legal predicament demands immediate attention and you need to select a lawyer quickly, or if you have the luxury of thoroughly searching for the perfect representative, follow these practical steps to find a capable attorney to work for you.

DESCRIBE YOUR LEGAL ISSUE

First, write down the key aspects of your legal dilemma. Have you been charged with a crime, or do you anticipate that you will be? Do you require analysis of a demand letter that your business received from a landlord, or competitor? Are you looking to incorporate your business, or obtain corporate governance documents like an intellectual property assignment from an employee, or internal data privacy policy for handling client’s personal, financial or medical information? Making a list of the important facts of your situation, and any next-steps that you think may be required or recommended, will help you identify which general category of legal services you require. Armed with this information, it will be easier to select the right attorney for you.

Legal services fall into three broad categories: criminal defense, civil litigation, and transactions. Attorneys practicing criminal defense will be able to help you fight charges or cleanup a criminal record. Civil litigators assist individuals and businesses in dispute resolution, and may represent either the plaintiff or defendant in court. Unlike criminal defense attorneys and civil litigators, transactional attorneys do not spend much, if any, time in the courtroom. Transactional attorneys, sometimes called corporate attorneys, are often called upon to incorporate entities, facilitate investment or mergers & acquisitions, and create corporate governance documents such as bylaws, operating agreements, intellectual property licensing agreements and data privacy policies. Many attorneys have experience or expertise in multiple categories, but generally, will only offer services in one.

CONSULT YOUR NETWORK OR CONDUCT ONLINE RESEARCH

Contacting an attorney referred through your personal or professional network is the best way to ensure that you select a trustworthy, knowledgeable and zealous legal advocate. This is because someone that you already know (and hopefully trust and respect) has already done the leg-work of vetting the legal advocate for their skill, customer service, and overall value. However, our networks may be limited to certain industry spheres or experiences making reliance on our existing contacts a fruitless endeavor. When that is the case, online research frequently generates good candidates.

SELECT AN ATTORNEY WITH THE APPROPRIATE EXPERTISE

Many firms have websites showcasing accomplishments and describing their services. Some even publish blogs regarding important news about the industries they serve, and describing how to troubleshoot issues that frequently arise for their clients. Once you have narrowed down options based on practice area, assess whether the attorney or firm is local, shares your values, and has experience working on your issue and with clients in your industry.

“It is best to select an attorney working in the same geographic region where your business is located because laws and regulations, including the rules of civil litigation, may be geographically specific.”

Working with a local attorney also provides you with increased physical access to your attorney, facilitating effective communication and a better experience for you. Next, read through the website to get a feel for whether the firm shares your values. Many law firms share their mission, business philosophy and story on their website. This information should help you determine whether you will work well with the firm. For example: If your cannabis business has been sued by a former employee for being passed over on promotion, then its probably not a good idea to hire a firm that exclusively represents plaintiffs (i.e., disgruntled employees) or whose largest clients have interests adverse to yours.

Also pay attention to the types of services prominently featured, and the firm’s clients. Oftentimes, work history and specializations are contained in an attorney’s biography.

“Be critical: if a firm advertises that it litigates product liability matters but all of its advertised “successes” from the last five years relate to forming wills & trusts or prosecuting trademark infringement, then it may not be the appropriate firm for your needs.”

Last, if your industry is heavily regulated or subject to constraints like a lack of access to banking, then select an attorney who has provided services to others like you.

For example, an attorney who has been providing transactional services for decades to technology startups and businesses in San Francisco, California may automatically advise all clients to incorporate their businesses in Delaware. They may even include a choice of forum clause, requiring disputes to be resolved in Delaware. This attorney would likely provide you with excellent corporate governance documents, but if the attorney relied on the norm for incorporating a technology business (i.e., in Delaware), that would subject your California recreational cannabis business to jurisdiction in Delaware (a state without a legal recreational cannabis market). Even worse, incorporating in Delaware would likely prevent you and your California recreational cannabis business from asserting a compliance defense to any federal investigators should the come knocking.

Ultimately, this last step may be the most important factor to consider when selecting an attorney and may even motivate you to choose a firm that is not local to you.

USE SOCIAL MEDIA TO CROSS-REFERENCE THE FIRM’S REPUTATION

Search for the firm’s profile on your preferred crowd-sourcing website to learn about prior customers’ experiences (ex: Google Reviews, Angie’s List or Yelp). Their profile may also contain information about the costs of securing the firm’s services, and how efficient they are with client funds. If the company has high ratings after hundreds of testimonials, then it’s likely that you will also be satisfied.

After narrowing down the list of potential firms based on practice area, location, values, customer reviews and experience with your industry, call to request a consultation. It’s common practice for a paralegal to screen any potential clients. Use your written description of the issue to provide the firm with an idea of your needs. From there, the next step is usually a 30-minute free consultation with an attorney who will then decide whether the firm is capable of helping you.

FINAL THOUGHTS

Not all attorneys will take on a cannabis industry client due to a variety of practical, professional, and personal reasons. Cannabis industry business people are well advised to seek out an attorney or law firm with a demonstrated history of representing cannabis industry clients, and with subject area expertise related to the specific legal dispute or question you identified.

Continuing Education of the Board

In February, Katy attended the Executive Education course “Boards that Lead” at Wharton School of Business at the University of Pennsylvania. The course was a two day intensive, attended by over 50 industry leaders from at least 12 different countries.

With so much of Katy’s practice focusing on what corporate boards cannot do (mostly from a breach of fiduciary duty standpoint), it was a refreshing exercise to think about what corporate boards should do. This perspective will gift Katy new foresight and strategies on governing the board as President of the National Cannabis Bar Association.

She looks forward to distilling her knowledge towards a new presentation at cannabis industry conferences nationwide and for the benefit of all her corporate clients.

The Masterpiece Cakeshop Case Is Not an Invitation to Discriminate

Author: Sean B. Gentry

Yes, as the media widely reported, the U.S. Supreme Court sided with the baker in the case about a Colorado cake maker turning away business from a same-sex couple after he told them that he did not design custom cakes for gay couples. However, rather than making a significant nation-wide ruling, the Court simply held that the Colorado Civil Rights Commission’s consideration of the baker’s case was “compromised” and it had treated him unfairly. Thus, the ruling in no way opened the door to discrimination for businesses against any persons with protected, immutable characteristics.

In fact, Justice Kennedy wrote that it is “unexceptional” that Colorado law “can protect gay persons in acquiring products and services on the same terms and conditions that are offered to other members of the public.” The problem was that the Commission did not apply the law “in a manner that is neutral toward religion.”Read More >

Employer Arbitration Clauses Can Waive Class Action Claim

Author: Sean B. Gentry

The U.S. Supreme Court recently ruled that employers can use arbitration clauses in employment contracts to limit their employees’ right to file or participate in class actions lawsuits on wage and hour claims. Employers can require their employees to pursue most types of employment claims in arbitration instead of court and can prevent employees from banding together to more efficiently litigate their claims as a group. For employers that have been waiting to see how the law settled on this matter, or that have been wondering about the validity of arbitration agreements already in place with their employees, it is now clear that these agreements will be enforced as long as they meet certain standards of fairness.

This case, entitled Epic Systems Corp. v. Lewis, resolved a number of conflicting Circuit Court opinions on this issue that stemmed from the National Labor Relations Board decision 2012 in D.R. Horton, Inc., which found that individual employment arbitration agreements were incompatible with the collection rights of employee under the National Labor Relations Act and that the NLRA was not preempted by the Federal Arbitration Act. However, a 5-4 majority of the Supreme Court disagreed with that finding and instead held that the FAA preempted the NLRA.

Changes to the Prop 65 Warnings are Due in August- Does it Apply to You?

Author: Wendy Hillger

Proposition 65 requires the State of California to maintain a list of chemicals that can cause cancer, birth defects or other reproductive harm. These warnings apply to landlords, business owners, bars/restaurants, and other retailers. Businesses with 10 or more employees that expose individuals to listed chemicals through their products or operations generally must provide warnings. At present, approximately 900 chemicals are required to be disclosed, such as additives or ingredients in pesticides, common household products, food, drugs, dyes, or solvents. Additionally, listed chemicals may also be used in manufacturing and construction, or they may be byproducts of chemical processes, such as motor vehicle exhaust. These chemicals can be in the products that Californians purchase, in their homes or workplaces, or that are released into the environment.Read More >

Attention (Again) California Restaurant Employers: Congress Changes the Tip Pool Rules

Author: Sean Gentry

Earlier in the year, we reported that the Department of Labor was proposing to rescind prior Federal restrictions on tip-pool arrangements, and that we expect a related decision from the U.S. Supreme Court on those rules.

In a somewhat unexpected turn, Congress decided to directly intervene on the tip-sharing agreements under the Fair Labor Standards Act as a part of a recently-passed spending bill.

Under the new federal law, employers with regularly tipped employees may include a broader group of employees in employer-mandated tip-pool arrangements, including any employees who provide “direct table service” or who are in the “chain of service.”

Familial Status Discrimination – Part III: Potential Liability for Landlords

Author: Trina M. Clayton

There has been a marked increase in familial status suits over the past several years, with many more that settle under confidential agreements for monetary damages, making the potential for these claims quite serious. A landlord found to be in violation of familial status housing laws could incur any number of penalties including:

Civil penalties of up to $16,000 for a first violation and $65,000 for future violations;
Actual damages to reimburse a tenant or prospective tenant for costs incurred because of the alleged discrimination such as paying for the tenant’s out-of-pocket expenses for finding alternative housing or rent fees associated with alternative housing;
Damages to compensate a tenant or prospective tenant who has suffered humiliation, mental anguish or other psychological injuries as a result of the alleged discrimination;
Punitive Damages; and
Attorney fees

A landlord may also be ordered by the court to take specific action to reverse the alleged discrimination (such as renting to a family which the landlord had initially rejected), and participate in fair housing training.

It is imperative a landlord abide by federal, state and local laws regarding Fair Housing. For specific legal advice on familial status or other types of housing discrimination, please contact Ad Astra for guidance.

Independent Contractor or Employee? Better Take a Second Look

Author: Trina Clayton

On April 30, 2018, the California Supreme Court issued an opinion in Dynamex Operations West, Inc. v. Superior Court, which could change the workplace status of people across the state. With this new ruling, the Supreme Court has clarified the standard for determining whether workers in California should be classified as employees or as independent contractors for purposes of the wage orders adopted by California’s Industrial Welfare Commission (“IWC”). Most notably, IWC orders apply to issues such as overtime pay and meal and rest break requirements.

The Court’s unanimous decision in Dynamex has particular implications for members of the gig economy, such as Uber, Lyft, and Amazon, as well as members of other industries, including cannabis.

With this recent ruling, the Supreme Court essentially abandoned a standard that California courts had used for 30 years to determine employment status, based largely on how much control a business exercised over wages, hours and working conditions. Instead, the Court in Dynamex applied the “ABC” standard (used in several other states) which sets out that a California worker is presumed to be an employee, not an independent contractor. Workers are permitted to be classified as independent contractors only if the hiring business demonstrates that the worker in question satisfies each of three conditions:Read More >

Forum Shopping? Even a Monkey Can Do It!

Author: Michael S. Dorsi

Attorneys often must choose where to file a lawsuit. They must estimate where the judge will be more favorable on procedure and substance, which court has more favorable procedures, and where the jury pool may be more sympathetic to the client. And readers should not be shocked to learn that attorneys often consider the political leanings of judges.

However, forum shopping to the Ninth Circuit Court of Appeals can have unintended consequences. While the Ninth Circuit has a liberal reputation and has historically ruled in ways that pleased Democrats and against President Trump, it is also a large court. Six of the twenty-two active judges were appointed by George W. Bush, and another eight judges on senior status were appointed by Republican presidents. Every sitting, numerous litigants draw a panel with two or three Republican-appointed judges. Many of these Republican appointees are well-regarded by lawyers and litigants of all political stripes, but if a plaintiff’s goal is to file in the Ninth Circuit and draw a politically friendly panel, that is just bad math.Read More >

Familial Status Discrimination – Part II: Tenancy

Author: Trina M. Clayton

It is important to understand that familial status discrimination may occur at any stage of property rental. Our earlier blog described some of the pitfalls a landlord might run into during the pre-tenancy period. Here, we will explore potential areas of concern during tenancy.

Examples of Familial Status Discrimination

Refusing to rent to families with children.
Charging a higher security deposit to families with children even if the family has a good rental history.
Increasing rent (called a “rent surcharge”) because a resident brings a child into the household.
Steering families with children to downstairs units, certain sections of a building, or to certain buildings or areas in a development (such as near the playground).
Restrictions on children’s outdoor recreation activities or use of common areas. This could include an “adults only” pool policy or pool hours; curfew rules that target children, or general premises rules regarding adult supervision of children.
- Examples of rules which violate the Fair Housing Act include, “children on the premises are to be supervised by a responsible adult at all times” and “persons under the age of 18 must abide by the set curfew of 10:00 P.M.”
No playing rules such as, “Under no circumstances may children play on stairwells, walkways, or carports. Under no circumstances may children[s’] toys or vehicles be used in the above areas or in pool area.”