If you’re reading this, you most likely already have a lawyer, should be looking for one, or are experiencing a combination of the two. I cannot tell you how many times I’ve heard the words “we’re not ready for that” or “we know what we need to get done,” only to watch as a budding business fails for lack of basic legal foresight.
So, let’s start from the beginning. Have the next brilliant cannabis business idea? Protect it. Have a partner you think will take your business to the clouds? Iron out your rights and responsibilities before ending up in an unhappy marriage. Thinking about taking that seed money from friends or family on a handshake deal? Depending on how far you’ve gotten in discussions, you may already be flirting with securities fraud. No matter how young you think your business is, it’s almost always worth the time and effort to seek counsel early and often to avoid significant burdens, expenses, and potential criminal liability down the road.
For most business owners, the most difficult question isn’t “Should I hire a lawyer?” but rather “How do I find the attorney or set of attorneys who can best serve my varied and specific needs?”
When choosing lawyers, it’s important to understand the nature of the legal industry and the staggering breadth of knowledge that goes into a comprehensive legal practice. While some attorneys describe themselves as cannabis attorneys (and there is nothing inherently wrong with that), that is a description of the industry they serve and does not adequately address the critical questions you must examine when selecting an attorney: 1) their substantive area(s) of concentration, 2) the jurisdiction in which they practice, and 3) the collective knowledge they can bring to bear on any particular problem or issue.
Tying each of these considerations together is the golden rule of any attorney-client relationship: mutually open, honest, candid, and frequent communication in a style that appeals to both the client and, yes, the attorney.
Can the attorney address the substantive issues you face?
Substantive areas of law within the cannabis industry might include general business and/or commercial (contract) law; real estate; compliance (state and local regulation); patent, trade secret, and other intellectual property issues; taxes; securities; and countless others. A “cannabis lawyer” might specialize in an impressive combination of these but won’t ever be able to do them all as well as you may want.
Identifying a great general-business attorney to help you incorporate an entity, structure your business to benefit from tax laws, draft a lease, and review and advise on commercial contracts is more than possible, but if that same individual is handling compliance with environmental regulations, managing an intellectual property portfolio, and also drafting securities offerings and pursuing tax litigation, there is a good chance the attorney might be stretching himself or herself a little thin.
Being able to have open and candid conversations about the attorney’s history and experience with a particular set of issues should provide some comfort. Traditionally, an attorney’s experience correlated with their fees, but that may not hold true for attorneys in this industry because of the nascent nature of cannabis businesses overall. Additionally, access to mentors and a larger network of attorneys can fill some of the holes that exist in the knowledge base of newer attorneys, so it’s always a good idea to explore both the attorney’s personal experience and the network (their firm or other professional associations) they may rely upon when faced with a novel issue. Ultimately, the attorney’s experience with the legal issues facing your business should reflect your comfort level. Once you know the experience, knowledge, and cost of a lawyer, it’s up to you to decide what mix is right for your business.
Does the attorney have geographical and/or jurisdictional expertise?
Any inquiry into the ability of your potential counsel should consider whether the issue or opportunity is controlled by local, state, federal, or international law. Currently, legal cannabis operators largely are governed by state and local law, and legal issues that relate to (for example) compliance, contracts, insurance, and real estate should be handled by someone licensed in that particular state.
However, bar membership is not the only consideration. Cannabis regulations vary widely from city to city, and your attorney should have an active practice in your specific location to ensure their familiarity with that locality.
Moreover, certain subjects are governed by a combination of state and federal regulation. For instance, raising money often is governed by state “blue sky” laws as well as federal securities laws. Trademark law is the same: Many states have begun to accept cannabis-related marks into their state registries, but trademarks may also be federally registered and common-law trademarks are governed by federal law.
Other areas, like patents, are exclusively federal and require a specialized license, like membership in the federal patent bar.
When discussing the scope of your engagement with an attorney, make sure they are properly licensed in the correct jurisdiction and are familiar with the law in the locality in which you operate. Remember: A license to practice law is necessary, but not always sufficient, to determine whether an attorney can help with your needs.
Does the attorney have access to the help he or she needs?
In the modern era, law practices range from solo practitioners to huge multinational firms, and business owners often wonder about the relative merits and potential pitfalls of each.
Given our prior discussion of substantive practice area and jurisdictional expertise, a large portion of this discussion must center around access to individuals who are familiar with subjects and locations that complement your attorney’s own knowledge.
With a large national practice, you may pay a higher rate, but those attorneys likely will have access to an integrated network that can handle a broad range of substantive issues in different geographical locations.
On the other hand, a solo practitioner may not have a firm backing them up but still may be able to handle a wide range of substantive issues and may have access to a large national network through other means, such as membership in the National Cannabis Bar Association.
And, don’t forget, some incredibly passionate and expert lawyers are in smaller or solo practices, and they may have access to a network that expands the range of services (substantive and jurisdictional) they can provide, rendering their work product substantially equivalent to attorneys from a larger, national firm.
This largely is up to your preference in personalities and how you like to cultivate your own team to help you advance your business. By going solo, you may have to do extra legwork down the road to ensure you have a full suite of legal support, but you may also end up with a team tailored to your exact needs. On the other hand, a larger firm has a built-in network of attorneys assembled by legal professionals who may end up knowing your problems better than you do.
The best way to assess whether the lawyer you are considering is the right choice is to take the time and effort to interview them thoroughly. Start with a recommendation from industry colleagues, but recognize not every lawyer is right for every client and you may ultimately go a different direction.
You have a right to know the level of experience and professional competence the lawyer can bring to your business. You should be open with your needs and expect the same when your attorney responds. Press them about how they plan to address your specific legal issues, find out how long the lawyer has been practicing in a particular area of law, and ask how long they have been serving the cannabis industry. Consider the attorney’s familiarity with local regulations. If the attorney will be applying for a state or local license on your behalf, determine whether they previously obtained authorizations and whether they have the personal relationships to help shepherd your company through the process.
If a lawyer claims to be able to address every potential problem that could arise for your cannabis business, dig further. Examine what other resources the attorney can bring to the table if a particular issue falls outside their historical area of expertise. If considering a solo practitioner or a small firm, make sure they are comfortable telling you what they don’t know. This person may end up being the equivalent of an in-house counsel or an attorney who spots legal issues on the horizon (even if they are not equipped to deal with each and every one of your problems themselves). This person should be confident and comfortable directing you to others in their legal network to make sure you always receive the highest-quality legal work for any issue.
Above all, trust your instincts. Communication is essential in this relationship, as is a high level of mutual respect, which will enable you to work through the issues facing your business together. If you’re not comfortable with potential counsel, keep looking.
Christopher J. Davis is the first executive director of the National Cannabis Bar Association. Previously a securities litigator and legal editor for Westlaw, he began his work in cannabis in 2015 when he represented small cultivators in Northern California on a pro bono basis. A graduate of George Washington University School of Law, he is a member of the California and New York bars.
The National Cannabis Bar Association was formed in 2015 by a group of lawyers who saw a need to educate and connect with other cannabis industry lawyers in order to ensure excellent, ethical, and advanced legal assistance for the industry. NCBA hosts a variety of networking and educational events.