In October 2017, Green Solution Retail, Inc., a cannabis retailer, petitioned the U.S. Supreme Court (SCOTUS) to review a decision which held that the Anti-Injunction Act and Declaratory Judgment Act barred Green Solution’s request to enjoin the IRS from enforcing § 280E of the Internal Revenue Code. Continue Reading The High Court Could Review the IRS’ Power to Investigate and Determine Whether Cannabis Dispensaries Engage in Illegal Activities
In a recent article, senior officials with the Department of Justice’s Office of the United States Trustee (the “UST”), the federal government’s watchdog of the bankruptcy system, reaffirmed the department’s position that bankruptcy relief is not available to businesses in the weed industry. Such a reaffirmation of a well-established policy is not new. However, the article is noteworthy in that it clarifies just how broadly the UST is willing to expand the scope of that policy and that it may prevent “downstream” participants, such as landlords of marijuana dispensaries, from accessing relief under the bankruptcy code. Continue Reading U.S. Trustee Issues Warning to ALL Participants in the Cannabis Industry: Bankruptcy Relief May Not be Available, So Don’t Let Your Profits Go Up in Smoke
According to reports appearing this morning in the New York Times and the Washington Post, Attorney General Sessions is expected to rescind the Cole Memorandum later today. The Cole Memorandum is a Department of Justice policy that strongly discourages federal prosecutors from enforcing federal marijuana laws in states in which possession and use of marijuana is legal under state law.
Sessions has long been a critic of legalizing marijuana use, but until now has taken no tangible steps to halt its use in states which have legalized it. Rescinding the Cole Memorandum makes it easier for federal prosecutors to commence criminal actions against companies and individuals in the cannabis industry. Even with yesterday’s appointment of seventeen new US Attorneys, it remains to be seen whether federal enforcement of marijuana laws will increase as a result of the recession of the Cole Memorandum. Whether or not federal prosecutions increase, the rescission of the Cole Memorandum is sure to cause many businesses and investors in the cannabis industry to rethink their strategies.
Transport of marijuana in states where it is legal to islands located within the state is complicated by the fact that transportation by air generally violates federal law. Rule 91.19 of the Federal Aviation Regulations (14 CFR 91.19) generally prohibits civil aircraft from knowingly transporting marijuana and other types of illicit drugs within the US. The prohibition initially applied to flights between US and Mexico but was subsequently amended to include flights solely within the US. However, the rule contains an exception for the transport of drugs “authorized by or under any Federal or State statute or by any Federal or State agency” and, as was recently reported by The Boston Globe (State Eyes Flight Rule to Ship Marijuana to Islands), the chairman of Massachusetts’ Cannabis Control Commission is looking at the exception as a means to potentially permit air transport of marijuana to Martha’s Vineyard and Nantucket.
A former Federal Aviation Administration (“FAA”) lawyer quoted in the Globe piece raises the question of whether the exemption applies if use of the drug is authorized by the state or whether the transport of the drug must be expressly authorized by the state. The wording of the regulation does appear ambiguous in this respect and the FAA has not provided any guidance on the topic.
There are also published accounts (Weed On A Plane: How Alaska Businesses Get Pounds Of Pot On Board, With Police Blessing) of marijuana businesses in Alaska making use of the provisions of the regulation that the carrier only violates the rule if it knowingly transports the drug. The businesses inform the airport police and TSA that they are transporting marijuana and provide documentation of their authorization to do so. Neither the business nor the police informs the airline so it is unaware that it is transporting marijuana. In the end, with cooperative police, the more viable alternative may prove to be “don’t ask don’t tell” provided that the marijuana is packaged so as to disguise the smell.
Attorney General Jeff Sessions is in the news for two reasons today: he’s testifying before the Senate Intelligence Committee on his possible links to Russia and a letter he wrote to Congress indicating his disapproval of the Rohrabacher-Farr Amendment has surfaced.
Last month we reported that Congress extended the Rohrabacher-Farr Amendment. No sooner was this extension passed, but Sessions wrote to Congress seeking its repeal. As many readers know, the Amendment prohibits the Justice Department from using federal funds to prevent states from implementing their own medical marijuana laws. It is, in essence, a victory for states’ rights, in the sense that they can decide whether to make medical marijuana legal, without fear of federal government interference.
Yesterday massroots.com, and today The Washington Post reported that in May, Sessions wrote to Congress stating that “it would be unwise for Congress to restrict the discretion of the Department [of Justice] to fund particular prosecutions, particularly in the midst of an historic drug epidemic and potentially long term uptick in violent crime.”
Of course, the “historic drug epidemic” to which Sessions refers has nothing to do with cannabis, but involves opiates, and, according to the Washington Post, a growing body of research shows that opiate overdoses decrease in states in which medical marijuana is legal. Sessions also wrote that “[t]he Department must be in a position to use all laws available to combat the transnational drug organizations and dangerous traffickers who threaten American lives.” It is difficult to understand how Rohrabacher-Farr prevents the federal government from enforcing the Controlled Substances Act against those engaged in trafficking in drugs across state lines.
Sessions’ position is contrary to that of the President who expressed support for medical marijuana laws during his campaign. However, over the past several months there have been a number of mixed signals from the Administration regarding enforcement of the federal prohibition on the possession and sale of cannabis. These mixed signals have created tremendous uncertainty in all segments of the cannabis industry, but it is hard to believe that the Administration really intends to disrupt what has become a multi-billion dollar industry.
We recently reported on the inclusion of the Rohrabacher-Farr Amendment in the current Congressional budget deal. The controversy over whether the Justice Department should be permitted to enforce federal laws in states where marijuana is legal for medical purposes only seemed settled, at least until the Consolidated Appropriations Act of 2017 expires in late September. Due to the signing statement that President Trump issued when approving the Act, however, we may have blogged too soon. Continue Reading Reading the Signs: Is a Marijuana Crackdown in Our Future?
The appointment of Jeff Sessions as Attorney General created a great deal of uncertainty in the medical marijuana community. Sessions has a long history of opposing the legalization of marijuana, whether for medical or recreational purposes. “Marijuana is against federal law, and that applies in states where they may have repealed their own anti-marijuana laws. So yes, we will enforce law in an appropriate way nationwide,” Sessions said in an interview with radio talk show host Hugh Hewitt in March. Continue Reading See You in September: Rohrabacher-Farr Amendment in Budget Deal
Seyfarth Synopsis: In response to recent comments from senior members of the Trump Administration, lawmakers are exploring novel ways to protect the burgeoning marijuana industry (and the many jobs that it is projected to create) in states where it is legal, including legislation that would prevent state and local agencies from using state resources to assist federal enforcement efforts. Continue Reading Sanctuary States … from Federal Marijuana Enforcement?
On January 10, 2017, Alabama GOP Sen. Jeff Sessions began confirmation hearings with the Senate Judiciary Committee for his potential role as Attorney General in the upcoming Trump administration. During these hearings he was asked questions that shed light on possible differences between the Trump administration Department of Justice’s stance on marijuana as compared to the Obama administration.
In response to a question about federalism as it relates to marijuana laws from Sen. Mike Lee, a Utah Republican, Sessions stated:
“One obvious concern is that Congress has made the possession of marijuana in every state an illegal act. If that is not desired any longer, Congress should pass a law to change it. It’s not the attorney general’s job to decide which laws to enforce. We should enforce the laws as effectively as we are able.”
As state laws regarding medical and recreational marijuana evolve, lawyers face a variety of ethical issues relating both to counseling clients in marijuana related businesses (MRBs)and to financing or participating in MRBs.
The ethical dilemma stems from the fact that while state laws continue to expand the legality of marijuana, its use and possession in any form is still against federal law. Most state ethical rules contain a rule similar to Rule 1.2(d) of the American Bar Association Model Rules of Professional Conduct (Model Rules) which states:
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 a proposed course of conduct with a client and may counsel or assist a client to make a good faith effort to determine the validity, meaning, or application of the law.
The dilemma created by Rule 1.2(d) is that it does not make a distinction between state and federal law. Continue Reading Lawyers Beware: Navigating the Legal Ethics of Counseling or Participating in the Marijuana Industry